OK Here is my situation.
PPOR worth $310,000 owe $174,000 repayments approximately $260 p/w
IP worth $150,000 owe $84,000 (rent income $110 p/w, loan repayment approx $125 p/w) IP loan is NOT Interest Only.
I know I can get more rent but have a good tenant who I dont want to upset.
Lots of money being poured into the area where my IP is located and I reckon further growth will happen in time, don’t want to sell it for another few years.
Twins on the way, and I want to reduce my outgoings. Any good suggestions?
You could always sell the IP and move the equity into your PPOR. Buy another IP in the area and this time borrow 105%. That way you have less of a loan on your PPOR and more tax deductible debt.
Yack has a sound idea if you chose to sell the IP. Don’t forget that the selling and buying costs as well as the CGT will need to be considered.
All I can suggest is that you ensure you have the best interest rates you can get and that the loans are IO.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Brendan, you’ve obviously made a note to yourself that changing the IP loan to IO is one way to reduce your outgoings.
Raising the rent is another. In regards to upsetting the tenant, do a quick look around to see what comparables are renting for, and maybe raise yours so that it’s still less. That way the tenant is still getting a good deal. Other than that, spend less I guess!!
Cheers
Melhi brendan
“Twins on the way, and I want to reduce my outgoings. Any good suggestions?”
you should be more worried about the “incomings” with twins on the way.
you have 80k equity and yet you are loosing money on this property . you had better be confident it will go up in value. 80k invested even at 8% will bring in 6,400 plus add the cost of the loss on the property of say 3,000 per year you need the property to go up by about 10k per annum to be ahead.
regards westan
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hang on, to be far the comparison should be the mortgage rate that the funds are destined for, so say 6.49% times the $66k equity = $4283. assume a $3k loss which is doubtful at that level of gearing but just say, add on $3k = $7283. thats a growth rate of just 4.9% which will be taxed at the CGT concessional rates. even the bear markets of Sydney/Melb are forecast to achieve that. Selling would also incur heaps of fees and you are locked out of a high growth asset. thats my quick analysis – take your time and do your sums carefully!
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Thanks to all of you who replied.
Wise council is the order of the day in these matters and I appreciate the input.
This is a question that i’ve pondered as well, how about Dolf deRoos advice of refinancing your IP back up to 80-90% and taking some cash out of the restructuring ??
I realise that if the cash is not used for investment purposes that the interest is not tax deductible on that portion…But, is it a way to allow yourself some ‘breathing’ space for a year or two ?? i.e – if Brendan2 was to pay a year or two years interest on his PPOR and IP to give himself and his wife the ability to not have to worry about anything apart from living costs ??
or
Brendan2 could simply rent out his PPOR, and rent something cheaper for his family.. is there a way of still keeping his cake ( PPOR ) and eating it too ??
Remembering that they will soon be going down to 1 income ?? Time for some lateral thinking..any ideas ??
REDWING
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