Hi guys
I own an IP in NSW worth $270,000 with $90,000 to pay off. I am contemplating buying another IP in QLD & the bank has approved a loan for $440,000 if required. The property I am looking at buying is $350,000 & not currently cashflow positive however will be if I sell my existing IP & put money towards the new purchase. The QLD property will offer me a greater return than my IP & possibly capital gains down the track as it is in a good suburb near the CBD on a large block of land.
Reasons for selling current investment are
1. Too many new units built in the area over the years and fear that my unit would not be very appealing in a years to come. Therefore won’t be in demand
2. Unit very small, no garage no seperate dining room etc, not to mention that it is not currently Cash Flow Positive.
3. Saving of strata levy approx $1200 paid every year and feel this can also be put towards another IP. I.e dead moneyI’d be interested to hear your thoughts and ideas on whether it is wise to sell one to put towards another IP.
PS I’m on a relavitely good income & have no kids, am 33 and hope to replace my current income through property by 40. Is this achievebale and has anyone out there done it in less time?
Thanks
i dare say that you will probably be inundated with responses to your query.
why dont you keep the 1st property and use the ample equity that you have to buy the 2nd property?? with your ambitious plans to quit work at 40 to embark on a ft career in property investment, you will need all the property’s you can get. furthermore, bear in mind that as you only have around 7 years to get to your target, I like many others see that not a lot of property growth will be occuring over this period of time, making it difficult i feel to sustain a lifestyle solely off property investment. also you say that the strata fees are dead money. sure they are but as they are an expence, tax deductible?? speaking of dead money what about all the selling costs involved in the 1st ip??
bottom line i guess is that it depends on your goals. if youre investing to speculate then doing what you suggest is probably justified. but if your doing this to invest and accumulate, thinking about holding the 1st ip is a better way to go.
Eric
Originally posted by Maria0911:I own an IP in NSW worth $270,000 with $90,000 to pay off. I am contemplating buying another IP in QLD & the bank has approved a loan for $440,000 if required. The property I am looking at buying is $350,000 & not currently cashflow positive however will be if I sell my existing IP & put money towards the new purchase. The QLD property will offer me a greater return than my IP & possibly capital gains down the track as it is in a good suburb near the CBD on a large block of land.
As Eric indicated you lose a lot of your profit in buying and selling costs and CGT. I would prefer to hang onto your existing property and buy this one too so that you are accumulating a property portfolio.
This will increase your asset base and improve your chance of meeting your goal within the timeframe stated.
In the grand scheme of things $90K of debt is not a lot. By your own admission you are on a relatively good income and any contribution you make through negative gearing and/or increased debt levels could be considered as ‘savings’ towards your ‘retirement’ at 40.
Reasons for selling current investment are
1. Too many new units built in the area over the years and fear that my unit would not be very appealing in a years to come. Therefore won’t be in demandIs this likely? If you structure your sale price correctly then you should always be able to find a buyer.
2. Unit very small, no garage no seperate dining room etc, not to mention that it is not currently Cash Flow Positive.
I am surprised that this property isn’t paying for itself and am assuming you are using P & I repayments as part of the calculation.
If so, have you considered converting to I/O which should make this cashflow positive. SUre it eans you won’t own the property but you already own 66% of it. This will increase with any future growth.
3. Saving of strata levy approx $1200 paid every year and feel this can also be put towards another IP. I.e dead money
Strata fees shouldn’t be seen as ‘dead money’ – they are used to help pay for your building insurance (something you would have topay anyway) and other costs of running your property business.
Sure house and land do not incur strata costs but there are insurance costs, gardening costs, maintenance costs etc that can come into play depending upon the natureof the property.
I’d be interested to hear your thoughts and ideas on whether it is wise to sell one to put towards another IP.
See above
PS I’m on a relavitely good income & have no kids, am 33 and hope to replace my current income through property by 40. Is this achievebale and has anyone out there done it in less time?
No kids – is this likely to change at any stage in the near/far future?
Thanks
Derek
[email protected]
0409 882 958
Property investment advice and researched property in quality locations available.Thanks Eric & Derek for all this very valuable information. Your points are very valid.
Derek, to answer your question, – no kids likely in the near future. My current mortgage is I&P. I will definitely look into the Interest Only for this property. Although I had thought about future repayments for new loans to be set up as Interest only, it hadn’t occurred to me to change the existing one. Deerrrrrrrrr I must be having a blonde day!Hi Maria,
Even if the loan is I/O there is usually no difficulties making additional repayments if ‘paying off’ an investment is your goal.
By paying I/O it does also give you the option of havig more cashflow to support other investments. It does come back to what are your goals? And, equally as important, how do you intend using the property in ‘retirement’?
Derek
[email protected]
0409 882 958
Property investment advice and researched property in quality locations available.Thanks Derek. I could do with incresing my cashflow for invetsing. My goal is to replace all or at least most of my current income through property which will help me pursue other career goals. I don’t want to be in my current field for too much longer and have a business idea I would like to get off the ground however would like to have a steady stream of income through property whilst I pursue this. Not planning on sitting on a beach for the rest of my life, but just want to be able to be free from relying on an income from an employer
I am currently involved in a duplex construction in Redcliffe…a beach side suburb 20km north of Brisbane.
The cost of land and construction comes to $430 000. The duplexes are worth $550 000 and will rent for $500 per week.
Once you take depreciations into account this property will pay for itself.
Therefore you do not need to put large amounts of deposit of buy in small country towns in order to have good cashflow.
The other major benefit from this construction is that I will have over $100 000 in equity once the construction is finished in about 6 months. This allows me to utilise this equity to repeat the exersice.
So Maria0911 have a look around I am sure you will find there are other similar opportunities. If you need any further information please feel free to contact me.
http://www.developersedge.com.au
130073 5934
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