- MillyMember@millyJoin Date: 2004Post Count: 288
I would like some advise from CF+ gurus.
I live in Brisbane and IPs are in Ipswich where rates are teh hightes in queensland but capital growth is assured.
My situation is as follows:
PPOR Value 600k. Mortgage 18k
IP 1 Value 220k Mortgage 120k Rent: 195/wk
IP 2 Value 200k Mortgage 150k Rent: 185/wk
Now I work casually as a teacher and earned 20k last yr. My income is subsidised by Centrelink payments. With four kids, there never seems to be enough money andI am a bit tired of the struggle of paying rates, insurance etc.
Now what I am thinking is I should sell one of the IPs but which one….or perhaps i should sell both.
IP1 is CF+ but any extra goes to rates and insurance. Capital gain promises to continue steadily
IP2 is CF- but my real estate friend tells me that its particular location is in high demand and capital gain will be quite significant in the future.
I am thinking the kids and I would be better off gaining a bit of an income from properties. If I sold IP1 , I could use the profit to buy a cheapie in the country where rentals are high demand. Thus it would provide a further little income for us. Or maybe if I sold both houses, I could buy a property outright.
I spose there is no RIGHT answer but I wish i had a crystal ball to consult. I am getting confused by my options.
thanks for any comments
MillyRichard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
Firstly if it does not read as a rude question are any of the kids over 18?
Investing in property can be a wonderful form of wealth creation but as long as it still gives you a life.
A balance between capital growth and positive cash flow can be the ideal way forward as long as you afford to fund the investment along the way.
Certainly with many properties located in regional Qld you will find that the rental income goes a long way towards covering the interest expense on the loan however you still have the other related expenses.
Obviously, from your income tax position depreciation and building write off have little benefit to you so therefore the higher income would assist.
Remember that the Centrelink income will cut out one day as your childen are no longer dependant and you may feel that you need to replenish that income.
I believe that you should maybe consider selling one of the properties to reduce your monthly expenditure weighing up the CGT consideration.
The balance of the funds after sale proceeds could be used to repay your non tax deductible home loan and put you in good stead for purchasing a cheaper priced + Cash flow property.
Another alternative is to consider wrapping as an effective method of increasing you income.
Finally, I am unsure as to how you have your current loans set up but the correct loan structure can certainly save you 000’s of dollars over the years. Suggest before you do anything you consult with an independant mortgage broker.
IP funding and US property finance
Richard Taylor | Australia's leading private lenderflashMember@flashJoin Date: 2003Post Count: 140
I’m not a guru but here goes!!
If I was in your position I would refinance properties and use for deposits on pos geared properties and LPT’s preferably in NZ and US.
I wouldn’t sell as I like Ipswich, think you can’t go wrong in the next 20 years.
cheers.MarkyMarkMember@markymarkJoin Date: 2003Post Count: 132
It sounds to me “and I could be wrong” that you are not sure of what result you want i.e. your not sure of your goal.
Maybe you could sit down and establish a crystal clear goal along with a deadline. Then once you have done that look again at your options from that new perspective.
I find that this works for the following reasons,
a. You know exactly what you aiming for
b. Once you know what you want you can evaluate your options by asking “how will this get me what I want?” or “what do I need to do to achieve my goal by the due date?”
This removes a great deal of confusion. I know that this may sound a little airy to some. But I have found this to be one of, if not THE most powerful thing that I have learnt. It just makes it all so much clearer. Sometimes I find that all my options are not up to scratch so I need to find some better options.
Hope that helps,
MarkyMarkMillyMember@millyJoin Date: 2004Post Count: 288
Thankyou all for your input.
Your advice MarkyMark touched a chord. I do feel like I’m muddling about in the dark. Writing down my goal and options is a perfect idea.
And Qlds007 (thats a hellova nick to live up to! lol ) My eldest kid is 13,youngest 6 so I have a ways to go till they are independant. I am not concerned about the future or relying on centrelink. I will sell the PPOR by then and should be able to set myself up with a lil cottage in the country. If I was sensible I’d sell up now and downgrade but the kids wont hear of it and frankly I’m not ready to leave either. I know it’s insane but my husb died here and it feels like Id be leaving him if I sold up.
and thanks for the idea flash but if I refinance and buy more, Id have even more trouble servicing the loans.
millyclonesParticipant@clonesJoin Date: 2005Post Count: 81IP1 is CF+ but any extra goes to rates and insurance. Capital gain promises to continue steadily
What do you mean IP1 is CF+ but the extra goes to rates and insurance. if you can’t pay all your expenses your property is CF-, you need to include insurance etc, and not only Mortgage repayments.
If this correct, you have 2 IP CF- and your PPOR which has a mortgage on it. If I was you, I would sell one IP (the more CF- one) and pay the mortgage from the PPOR.
Cloneskay henryMember@kay-henryJoin Date: 2003Post Count: 2,737
I think you’re in a pretty good position, although you sound like it’s a bit tiring for you- and no wonder. Investing, working and raising 4 kids can be pretty tiring, no doubt.
You have $1 million assets, and 300k debt, so you have 700k equity- pretty good position to be in, I think. Your biggest assrt is your PPOR, but if you want money making money for you, you could sell that and rent for a while. It sounds like rents in Ipswich are pretty cheap. If you invest the PPOR money into CF+ you will be pulling in a lot more than you’re pulling in now. If you sell the IP’s, you’ll be paying CGT, whereas if you sell the PPOR, you won’t.
As far as guarantees about future growth… I wouldn’t bet on it. I think you need to go on values *now*- not some hope of potential gain in years to come.