My story is rather like Muso Dave.I got 2 investment properties (at Auburn & Abbotsford, NSW). Have been holding them for 2 years & 1 year. Both are negatively geared and have close to zero capital gains so far. Auburn property costs me about $80 per week, so does Abbotsford in losses. My A-Ha moment was when Steve said things about ‘lazy money’ & ‘fit money’. Equity from my residential home is obviously locked into these 2 ‘lazy’ properties which could be used in other ‘fit’ properties elsewhere.
Auburn loan is Interest Only. Around $1100 per month. Tenant pays $200 per week.
Abbotsford loan is Interest Only. Around $2400 per month. Tenant pays $280 per week.
All of these properties including my residential home are cross collateralised.
Which is a No-No as I learned from the Master Class.In my case, if I sell off these 2, I could be losing much of my equity of my residential home to cope with the closing costs & tax (if any).
Whatever equity leftover, would like to use it for purchasing some cheapies, positive cash flow properties elsewhere. Now, am not scared to invest interstate, before I was !.What are your thoughts in my situation ?
What CG did you acheive?
What do you consider to be zero?
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Not sure that I’d be too hasty getting rid of a property in Abbotsford. There may be a pause in prices now, but it’s a great suburb. Granted, there are some less than great parts in every suburb. Where is the property?
ScottI agree with Scott. In the long run both properties should be good, especially the Abbotsford one. It is a matter of if you can handle the repayments. What can you do to increase the rent? And can you get a 221D to reduce your wekkly tax bill. Have you got depreciation schedules done? All up when these tax deductions are taken into account, it is probably not that bad.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I think that what Paulusi is stating is that while she acknowledges the 2 properties will “probably” appreciate in long term, she feels that the money would be better off in cheaper properties that will make money (i.e. CF+ve) from day 1.
Am I right Paulusi ?
If paulusi is who I think she is then I think that’s right bennido. Taking a position in the market may mean a change in strategy. If values going sideways looks like a long term propostition then having “lazy” cash in buy and hold properties may not be the way those who want to run their investing as a business, want to do business.
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I know I can, I know I can
Try this rule of thumb Paulusi,
1) Every 10 years property doubles (A good –ve geared property should at the very least!)
2) Work out your NET holding costs over this period (estimate of course. Can’t predict interest rates etc).
3) Subtract 2) from 1)Do you see a healthy profit? I would hope so! Don’t loose sight of the big picture when you negative gear!!!
I understood what Paulusi was getting at.
And I’m all for shuffling things around.
I still think that if the Abbotsford property is well situated, I would hang onto it.
At least it hasn’t dropped in value like some inner city apartments. To me that implies she didn’t pay an inflated price.
Paulusi said she would would be losing money if she sold it. There has been no gain, so the losses may include stamp duty etc on the way in and agents commission, advertising etc on the way out.
These losses Paulusi said would reduce her PPOR equity.
Even if that loss was only, say, $20,000, that’s going to take a long time to claw back from +cf properties.
Maybe the Auburn one could be sold and the loan on the Abbotsford one reduced?
Then again maybe I’m completely wrong.
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