Question on my next step forward

Are you able to add value to your IP to create equity?  Quite a few forumites do this to help them leverage into more properties.

Hi Danny

You don’t need to spend a lot of money updating a kitchen. If the bench top and carcass are in good condition you might be able to get away with new doors, handles, sink and a flash mixer – a new splash back can also do wonders.

Cheers

Jamie

Hi Danny,

I'll take the other approach – reading the fine print it would seems like you are going to have to confront some spending/lifestyle habits. I see little value in selling an asset to pay off personal debts unless there is no other option.

Sure you can upgrade kitchens as per the other posters have suggested but the underlying issue may well be outside the four walls of your property. Being a successful investors requires good decision making AND good personal financial management.

Seems like you need to work on your management first as $40K in personal debt will be a huge hand-brake on further borrowings.

No worries Danny.

Now I don't know how long it has taken to rack up the $40K so what I say may seem like a slow process but good things come to all who wait.

At the moment your focus should be to get rid of those personal debts while making sure you maintain and retain your investment property if at all possible.

1. Set yourself a realistic budget starting with your fixed commitments loans, rent etc
2. Budget costs for needs such as food, utilities, transport, fuel etc
3. See how much you have left over – this is your discretionary spending.

But in your case you will need to devote a fair chunk of your discretionary spending onto a debt reduction strategy.

Simon Macks (an old time poster) worked a strategy that started with the smallest debts first. His strategy was to pay off the smallest debt as quickly as possible (make it hurt a bit by reducing expensive social/lifestyle habits).

Once the first debt is paid off use the money normally earmarked for the smallest debt to then tackle your next smallest debt and so on. Eventually you will only have one personal debt with all of your surplus money being devoted towards reducing this debt.

But – as you said – changing habits is very hard. Set your self achieveable goals and work towards them.

Quick question are you paying P & I on your loan. If so convert your investment loan to Interest Only. Use any money saved through this process to tackle debts. Also consider submitting a PAYG Tax Withholding Variation form so you get some tax benefits back in your pay packet rather than at the end of the financial year.

PS Cut up those credit cards.

Hi Danny

Sorry i have to question either the rate of interest being charged on the loan or the structure or manner in which you have the deal set up. If the loan is over 80% then you would incur LMI if you refinanced but i guess it all depends on how much you are paying on your personal loans. You could split the loan to safeguard the Tax deductibility but would at least be paying the non deductible personal debt off at a sensible rate circa 6.25%

A 250K loan on interest only with a 100% offset account or split combo loan with part Fixed interest only and part P & I could save you a couple of $$$ per month alone. 

More hard data would be need to do the figures justice but sounds like your lender is not doing you any favours.

Cheers

Yours in Finance

Changing to interest only should be a relatively straight forward process for most banks. There is no need to delay this action on your part. Effect will be pretty much immediate and you'll be able to start using the money saved converting to Interest Only to tackle that $40K

Happy to explain it to you. A withholding variation is relatively simple for most people. If you want some guidance send me a PM and I'll talk you though the process but you'll need to fill in your own form. The ATO is currently accepting variation forms for next financial year. So it is a good time to get yourself moving and take action.