Gawd.. I’ve just joined this site and geez… there is so much knowledge out there. Everyone knows so much! I feel, by comparison, that I know nothing and feel very ignorant now!
I am seeking some tender loving guidance and soothsaying. As I’ve said, we are nervous investors at the moment. Three years ago, trying to put in place steps to reach our ‘goals’ for financial ‘freedom’ we bought a 2 bedroom unit in Penrith (Sydney’s far west). FANTASTIC tenant, has been there for 15 years, pays 6 months’ rent in advance, amazing. Anyway. It cost us $145k. Put the deposit on our PPOR (I think I’ve got that acronym right) and locked in $130K Int.only for three years. Three years down the track, we’ve moved states, got a whopping $250k mortgage on our new PPOR (sold the other one), been very busy and had three kids, single income, freak freak, money money, cash cash, bills bills, need I say more? So we thought, right let’s off load the Penrith investment unit (not that it costs us that much to run; the rent $150pw pretty much covers the loan, and it’s just the quarterly rates and Body Corp. slug). Lo and behold the agent I rang said “geez it’s real bad here at the moment, don’t sell it if you can afford to keep it. You’d be lucky to get $150k for it – now if it had’ve been 18 months ago you’d’ve got $200k”, yeah right, shouldacouldawoulda I say.
Any insights?
Lots to Learn Investors
Enelson
I would say that Agent is one of the most honest Agents I have ever heard. They don’t get paid unless they sell so if he is telling you not to sell, he has your interest at heart in my opinion.
There are ways of improving cashflow using appropriate loan structuring. How are yours set up regarding payments etc. Is your PPOR interest only with an offset account?
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksHello Mortgage Adviser, I was hoping you’d reply! You’ve given lots of good info out I’ve seen.
Nope, we are doing it all very safe. Our PPOR is just your nice and easy P and I variable homeloan. No offsets, nothing! We only just moved here too (6 months ago). Cost us $315K. Borrowed $252K. I just want to get rid of my PPOR mortgage!!! I thought our unit could help do that (by selling it for lots of money) Not so.
Enelson
It is good to see you posting!!! Welcome to the dark side…
You said your ‘Penruff’ investment almost pays for itself but would be difficult to sell for a substantial capital gain.
If you are stuck, I would suggest changing your PPOR loan to interest only and attaching an offset account. The main risk here is over-spending as you see lots of dollars in your account. If you are good with money, the benefits far outweigh this risk.
You have all your wages and rental income put straight into the offset account. You have your investment loan and other bills paid via direct debit from the investment loan on the very last day required. If you have some excess income each month, the amount required to pay on your PPOR will reduce if it is interest only and your cashflow position will begin to improve.
If you can afford to make all payments now, you will do well with this slight structural change to your loans. This will give you lots of time to consider various options or obtain a better price for your home. You might even be able to sell it to the long-term tenant with some sort of ‘creative idea’ that someone here may be able to help you with.
Other benefits of this structure are that if and when you decide to move again, you just withdraw the funds from your offset account and the whole loan will be deductible, If you want to pay it off, you just transfer the money from the offset to the loan and if you get in some financial trouble, you have cash available (only for emergency).
There is also no restriction on how much you can pay so you can increase payments at any time if you feel more comfortable doing this.
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksHang in there, we have given up on so many opportunities in the past and found we could have hung in there and made heaps. eg our first house we sold and realised later we couldhave kept it, rented it and bought the next one.
Hang in there… (sure its tough)
Steve G
Thanks for the detail re: restructuring our PPOR loan Mortgage Adviser. Definitely something to look into to ease our cash flow issues. Yes Penrith… is that with one ‘ef’ or two?
Since hooking up with this site I have seen so much good information about the whole ‘long term vision’ thing so yes, we will hang on to Penriff for a bit longer.Enelson
I hope the number all work out for you and you kick a few more goals… Good luck!
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksI sold a couple of Brisbane places when I was younger back in the late 80s and early 90s.
Of course hindsight tells me that the $100K sell price would be now $250K++.
Would have been easy to hold though.
Those lessons will strongly influence my future plans.
Cheers,
Simon Macks
Finance Broker
[email protected]
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.
Take a deep breath and analyse the figures – are you actually in strife, and is it because of the investment property? The answers to these questions should help you figure out your next steps.
sit tight! You have got to consider the entry and exit costs. I might be old fashioned but I have always thought of property as a long term investment.
Good Luck
Don Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
Gee, I certainly have done this A*** about. I have just read the ‘positive cashflow’ article on the home page. Whilst our Penriff unit is negatively geared (just a little bit…), and hasn’t appreciated in value over the past 3 years it’s not all bad. The philosophy of this web site seems to emphasise that property investing needn’t be all about capital appreciation. I feel much better now. I guess in another year or 2 we could put the rent up and we’ll nearly nearly have a positive cash flow property even though it’s just a daggy little 2 bedder in the lovely sunny suburb of Sydney’s charming outer west – Penriff!!!
Enelson
That is the kind of IP I like to get, the one that cost nothing to keep. I didn’t know it still exists today. A property that I am looking at cost 260K and I get 200/week max. I like the Steve McKnight high cash flow principle to accumulate IPs if you still can get it, it sounds logical.
Hang in there if you can. We have been there, done that. Thankfully we didn’t sell.
What about the rent? Currently rents are going up in Sydney due to landlords selling out, hence a shortage of rental properties.
cheers
blossomozI guess in another year or 2 we could put the rent up and we’ll nearly nearly have a positive cash flow property even though it’s just a daggy little 2 bedder in the lovely sunny suburb of Sydney’s charming outer west – Penriff!!!
Nelsons,
If you look in the latest edition of API they have a feature called Sydney’s ‘Westies’ in the article it states 10% of Sydney’s population lives in the west. Also goes on to say vacancy rates have hit 4 yr low so this is all v positive for your property in Penriff!!
Whole article is worth a read…Hang in there [biggrin]
Cheers
Jenny1
Enelson,
I have a different point of view for you consider and this is what I would do if I was in you shoes.I would do what ever it takes to put yourself in a position to be an active investor NOW. I would not look at what I could do to the rent two years from now because you are basically saying that you will be tight and an inactive investor because of your cash flow situation for the next two years.
I woul do a massive assessment of your budget and set aside some for investment specific activity.
As for whether you need to sell the Penrith property or not – you will need to decide how it is that you will improve your investment capability. Do you sell Penrith? Do you sell your home? Do you get a part time job? You will need to decide. What ever you do, decide first if you wish to be an active investor for the next couple of years or not.
Maybe enjoying your family is a priority instead. But think about whether this one investment property is holding you back from many others. Even if the long term seams attractive now.
May’s edition if you can get it on backorder from your newsagent also had 50 top tips to improve your retal yield. Every tip had a footnote from Deppro director Paul Bennion about tax deduction of the work done as well.
(My wife and I were also profiled on page 48) So a great one to chase up……for the tips the tips!!!
DD
Buyers Agent (Dip Financial Services(FP)
Don’t sweat the small stuff,and it’s all small stuff!!
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