I purchased a property in WA in 2001 for 200,000 I currently owe 100,000 on it. It is currently tenanted at 250.00 per week which (through an agent) it does not cover loan repayment not to mention the added costs of rates water etc,
With the current market the way it is, I might fetch 330,000 if I was to sell. Should I sell and pick up two townhouses that will give me a passive income or continue to hold the house.
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Hi shazzajaksic
I would probably hold onto the property and have it revalued by your lender. Lets say your lender revalues it at $300,000. You then increase your loan on the property to $240,000 (80% LVR so there should be no Lenders Mortgage Insurance cost). This then gives you $140,000 to reinvest, possibly on a cashflow positive property.
One idea would be to use some of that equity to purchase a property and on sell it using vendor finance (wrap or rent to own), usually a very cashflow positive technique. If you need more information on vendor finance techniques, have a look at the “Investor HQ” link on this site. Alternatively, feel free to drop me an email or PM.
Good luck.
Cheers, Paul
Paul & Karen Dobson
negative2positive
Turn your negatively geared property into a positive cashflow investment.
Phone: (02) 4984 9540Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Thanks Paul
Unfortunately I have already used the equity in the house to purchase another property, (the one I live in) I now find myself having too service two mortgages , not what I had wanted.
Hi shazzajaksic
The following is based on your original post in which you say you currently only owe $100,000 on the IP.
Just because you raise the potential borrowing on your IP to $240,000 it doesn’t mean you have to use it all. A good broker or your existing lender will set you up with a facility from which you can draw as opportunities arise.
Let’s then look at the example of one of our recent Joint Venture investors. He invested $17,526 to buy a $230,000 house which we have on sold for him using a vendor finance technique (a Wrap). The house now generates $212 per month positive cashflow for him. He is also getting $97 per month to cover the interest on the $17,526 he’s invested.
When we refinance the purchasers into a traditional loan in two to three years he will get somewhere between $14,000 and $15,800 as a gross payout.
I understand that going into a third loan might seem “a bit too much” but with the extra $200 per month profit you could reduce the burden of the negative gearing from your first IP and make an good return on the equity you release from the IP when you have it revalued.
Good luck.
Cheers, Paul
Paul & Karen Dobson
negative2positive
Turn your negatively geared property into a positive cashflow investment.
Phone: (02) 4984 9540Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi shazzajaksic
If you owe $100k and receive $250 a week rent and it isn’t covering the loan repayment, you must be on P & I. Have you thought of changing to interest only, as this would then provide cashflow.
Also, if you have aready refinanced and borrowed against the extra equity, by the time you sell and pay all the associated costs, would you really have enough left over to buy a pair of +CF townhouses? There’s a lot of money wasted in selling and buying.
Regards
WakeHi shazzajaksic
Can you provide further details on your property, where in Perth, what type of property etc.
Thanks
M(Hard work never killed anyone, buy hey why take a chance)
I’m now wondering if you have your property structured correctly and are obtaining all of the available benefits available to you as an investor such as your negatively geared taxation variance back in your pay packet weekly? How old is your property? Have you sought out professional advice in relation to your property investment? I know my first was almost the last! Fortunately I lived to tell the tale and now it has multiplied!
Investments without the correct structure and/or advice, loan setup can be a disaster and leave you wondering just why people brag and blow off about how good it is.
If you are wondering what I’m talking about please ask, if not me then choose anyone. It means you need help and very very soon, and that’s not a bad thing it took me 14 tries to find the right accountant and then that one decided to retire! Aargh! Nooooo! Well anyway enough of my ramblings. Best of luck.
Stuart Milne
Non-Conforming Specialist
READY Mortgages
http://www.readymortgages.com.au
[email protected]
Mob: 0404 056 055Hi Shazza,
On the basic figures you have posted, your property should be at least cashflow neutral. If you want more help you will need to supply more information as follows:
What’s the interest rate on your $100K loan?
Is it Interest Only or Principal and Interest?
Is it fixed or variable ?
What is the total of your costs ie: rates, insurance mangement etc?
How old is your property ?
Does your property have a depreciation schedule?
Do you claim tax back per pay (using the tax variation from the ATO)Remember, over time, you will still keep gaining equity in the property as long as you don’t sell. Who kows how long the WA growth will keep going?
It’s hard to make any suggestions on selling or holding because I don’t know what your goals are. What are you trying to achieve?
I personally, would avoid selling if at all possible, especially because your rent return is high (compared to your outstanding loan balance).
Todd Burns
http://www.freepropertyhelp.com.auYou need to tell the full story here Shaz!
There is mor information required if you want genuine advice. But I agree – You do need help. Nothing wrong with that. Just put your neck out a bit and you will be surprised at what happens.Harley
Interesting post – following with interest.
I’m in a similar situation (2 x Perth IP’s -ve geared on one on interest only and +ve on another P&I) with their market value rocketing along on double digits year on year – i will have a strongly significantly cash flow +ve portfolio very soon (also in high growth areas which is nice). My strategy hasn’t changed but geez it looks tempting. I have decided not to sell (so far) but will keep asking the qustion. What puts me off selling is the question that follows soon after – if I sell where is the better deal coming from and that’s where I get stuck. I have enough equity to buy another two when I find them so for now will hang on for the ride.
I’m in a similar position to Andrew. Actively looking for good deals in Perth but am in a situation where I’m better off to sit tight and wait while enjoying the continued growth. Keeping a close watch to see when the kettle starts to come off the boil though.
jebro
Originally posted by jebro:I’m in a similar position to Andrew. Actively looking for good deals in Perth but am in a situation where I’m better off to sit tight and wait while enjoying the continued growth. Keeping a close watch to see when the kettle starts to come off the boil though.
jebro
Will you or any other forumites be jumping in when this market finally comes off the boil? I heard this is a resources boom of a generation. Brickies don’t go from getting $0.50 to $1.40 a brick in a very short space too often. Will you be prepared to hold the property over flat to CPI growth for the next 10 years?
Hi,
I ended up in a similar situation. I bought a house (new PPOR) before able to sell my flat (1st PPOR) so I rented the flat out. Problem being the equity was in the flat and I had a huge mortgage. After some advice from my accountant I sold the flat, have moved a bit of equity into the house. So now I have a healthy bank balance and equity in the house so I can go out and do more investing….
I remember the phrase from the Masterclass I attended in Brisbane – got to breathe out before breathing in again!!
The bank now happy to lend me more money [biggrin]
Good luck!!
Regards
Piphi guys,
I love that quote pip .You have to breath out before you breath in again.
I just warn all the other to be carefull in this market as a profit isn’t realised until it’s cash in your hand.
If we are at the top end of the market , i’d say we’d have to pretty close if not there already, then you might end up like the stupid game show contestants on “Deal or No Deal” that think they they could get just that little bit more if they take one more pick but end up walking away with little or nothing. That’s not smart investing, its just gambling.
Don’t foget another qoute by Steve ” Multiplication by division”
I’d say cash in those realised profits.
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