All Topics / Creative Investing / Creative Finance Solution?

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  • Profile photo of robynarobyna
    Member
    @robyna
    Join Date: 2005
    Post Count: 13

    I've had the 'standard' advice from my accountant, but would be interested if anyone has any creative solutions to maximise my current situation!
     – PPOR Sydney purchased 2000 $360k, value approx.$600k, Portfolio loan balance $185k
     – IP New Farm purchased 2002 $321K / Rent $420/week. IO 5yr loan $336k maturing DEC07, value $585k

    I've seen a strata unit on the Gold Coast, outstanding views can never be built out and good holiday rental occupancy (80%) with room to improve nightly rental rate. The idea was to sell Brisbane, pay off my home loan and reinvest in the Gold Coast apartment for occasional personal use and in the holiday rental pool rest of the year.

    This of course selling New Farm creates CGT implications, agent commission on sale etc etc – I'd really like to KEEP what I have and buy the Gold Coast apartment as well – any clever ideas out there please?
    Thank you

    Profile photo of Kipper57Kipper57
    Member
    @kipper57
    Join Date: 2006
    Post Count: 252

    Hi Robyna youve done well, without knowing your full income and expenditures it would be hard to know, you ceratainly have ample equity so that would be no drama.  Feel free to contact me through our web site for a full assessment or one of the other brokers on the site.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    You've got a fair bit of equity, so you could probably buy 3 to 4 more properties if you wanted to. Whether you could afford it or not will depend on your income and rents received.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of trakkatrakka
    Member
    @trakka
    Join Date: 2004
    Post Count: 257

    Hi, Robyn! I'm not sure if this is a moot point now, but I'd rethink. Certainly you should be able to purchase more property without having to sell anything; you have heaps of equity. So unless you think the property in New Farm is a fundamentally bad investment, I wouldn't sell it. You're better off to be an investor than a trader; let time work its magic.

    With regards to the unit on the Gold Coast, this doesn't necessarily sound like a good business decision. Properties such as the one you describe have a number of disadvantages. Firstly, lenders will usually only lend 60%-ish on these kinds of specialist properties. I look at it this way – if I have $100K in equity, I can use that to buy a $250K holiday let apartment (60% is $150K), or I can use it as a 10% deposit on 4 x $250K houses. Yes, you get a better rental return on the holiday lets, but you also have higher expenses (cleaning, and body corporate can be HUGE), and your capital growth generally isn't as good. When your property is one of a large number of "same" units, your ability to add value is very limited, and there's usually a fairly high turnover of ownership which keeps prices down due to the constant presence of competing product.

    I think you're far better off buying the 4 houses, in terms of capital growth prospects. Or even 1 house!

    The fact that you love the views so much and want to stay there occasionally on holidays also suggest to me that this is being drive by emotion rather than because it's a sound business decision. Go stay there every year in somebody else's unit and pay $1000 or whatever it costs – getting a free holiday every now and again is financially insignificant compared to any potential difference between investment choices, so it shouldn't even come into consideration.

    Best wishes,

    Tracey in Brisbane

    Profile photo of bardonbardon
    Participant
    @bardon
    Join Date: 2004
    Post Count: 557

    Robyna, keep New Farm the outlook for new farm is very strong and will benefit further from infratstucture delivery listen to what trakka has to say and if you still want to go ahead with gold coast then max out all your investment loans and transfer any surplus funds against your house mortgage to ensure that the maximum amount of investment interest is deductible.  The transcation cost for selling new farm and buying gold coast will set you back with no obvious benefit.

    We had the same issue of trying to buy an ip that we could also utilise for holidays and it was blurring the ROI factor in the end we just bought pure IP's and we can still go on holiday whenever and wherever we want and we know that our IP's are performing as expected.

    Profile photo of Skispy Galipsy.Skispy Galipsy.
    Member
    @skispy-galipsy.
    Join Date: 2007
    Post Count: 10

    Hi Robyna
    What area of the Gold Coast are you looking at buying?  A few things before buying a unit on the GC.  check the body corporate and how much money they have in the sinking fund.  Check the body corporate minutes.  These can reveal some nasty secrets.  Rememer if you do buy to get a quantity surveyor to come in and body corporate assets are tax deductable.  Any further advice feel fee to drop me a line.
    peter gwynne
    [email protected]
    0423 028 239
    ex managements rights business owner.

    Profile photo of 25North25North
    Participant
    @25north
    Join Date: 2004
    Post Count: 19

    Hi Robyna,
    Exciting times, lots of equity to expand your capital base.
    Nice reply from Trakka.

    Profile photo of hleunghleung
    Participant
    @hleung
    Join Date: 2007
    Post Count: 141

    There is no way that I would sell New Farm.  The costs involved are not worth it.

    I'm a buy and hold investor who uses increased equity to buy more property.   You may be able to use your equity to keep New Farm as well as buy the unit even though I'm not a fan of most units. You need to contact a good mortgage broker.

    Profile photo of philbambackphilbamback
    Member
    @philbamback
    Join Date: 2007
    Post Count: 18

    We all buy things to enjoy, whats the use of working or investing if you dont.  I personally dont beleive it all should be about the $$.  It's called investing in your joy.

    If I were in your shoes, had a long term view and depending of course on your particular circumstances I would roll the OO property in a Cash Flow Mortgage (only if you needed to from a $$ point of view) and go and buy the unit.

    If you want the spreadsheet to see how the numbers work + some tax opinions on the product email me.

    Profile photo of L.A AussieL.A Aussie
    Member
    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488

    I have to agree with Trakka (Tracey).

    Also; get a list of ALL the outgoings from the complex, and what your share will be. You may be surprised how high the costs are.

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