I have 2 properties – one is an investment which is negative geared, and my house of primary residence. I have $280K owing on the investment property, though it is worth around the $400K mark. It is rented at $200 pw. My house of primary residence is also worth around $400K, though I have $450K owing on it. It can be rented at $270 pw.
I’d like to purchase positive cash flow properties but can only do so if i sell my investment property, in which I am liable for around $50K capital gains tax. My alternative is to build on the investment property and live in it, thereby reducing the capital gains. The house I am living will then be rented out. Shall I build on the investment property or sell? The plan is to purchase 5 positive cash flow properties in Adelaide which would generate around $1500 cash flow p.a each. What do you think?Assad
Under Financial Services Reform laws we can’t advise you whether to sell or hold, unless we hold the correct license.
A finance broker can summarise your position and advise if you can afford to purchase the properties you intend to purchase based on serviceability.
If the properties are positive cash flow, then there is a good chance you can buy them now without selling. But without all the details it is difficult to tell.
Regards
JohnInspired Finance
[email protected]
(02) 9944 7776Thanks. Though I just wanted to see what other people would do in my situation. In terms of getting the finance for the investment properties, I’m virtually sitting on 80% equity, and am not a big fan of mortgage insurance.
AssadHi Assad
My opinion… the investment property worth 400K and renting for only 200pw is not a particularly good return. If you sold it, could you do better? You say you want to have 5 cashflow positive properties, and this one is negative. Does that mean you would need to buy 6 to counteract the current negative one? Maybe this property is holding you back?
Needs more number crunching.
Andrew
http://www.rentmaster.co.nz – Property Management Software
http://www.RentalAnalyst.com – Property Analysis SoftwareLike Andrew said, a house wirth 400K renting out for 200 seems way below market rate without knowing too many details.
Is there any way to increase the rent ? In most cases, the rent should be much closer to 300-400 pw for a place of that value.
Thanks for the replies..I was thinking selling the $400K property,and use the $120K profit as deposit for 5 or so positive cashflow properties. The reason the return is low on this property is because it is a very old run down house on a very large property. I never bothered renovating as I had always planned on knocking down and build on it. I’ve always had a sentimental attachment to this house as I grew up next door, though should have sold during the boom.But I suppose more number crunching is required.
So what is stopping you from getting a town planning permit to build multiple town houses or unit … and build it; see you dream mature rather than let some other developer take the glory.
Just a thought
Regards
ptnBelieve me, I have explored all building options. Unfortunately our property is zoned 2a, which means I can build nothing but a double story house, as the block is 15 x 62 mtres (need 17m wide block in our council). Ideally we would have built an additional house behind the current house. We are leaning towards building and living in the new house in order to reduce capital gains, and sell my current house at a capital loss in a few years time (as it will become an investment property).
Hi,
Personally I would hold on to the property, because you do want to balance your portfolio and have some negative and some positive cash flow properties. I may be able to help you turn your negative cash flow property into a positive one. If you are interested, please contact me on 0416 127 211.
Thanks,
AdiAGarcia
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