Forums / Property Investing / Help Needed! / To hang on patiently or buy??

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  • Profile photo of gatsbygatsby
    Join Date: 2003
    Post Count: 708

    I had good equity in the two investment properties that I currently own. However I made the fatal error (greed ) a few years ago where I put $70k of 'my own money' into a high interest returning investment scheme and a year ago drew down $100k from my equity to add to this investment. Since the start of this year, the guy involved has gone belly up (with endless promises of 'she'll come good next quarter!') and after having seeked legal advice, there's no point in appointing liquidators (except of course if I want to continue throwing good money after bad!).
    My question is to my current financial situation. I was hoping to have bought another investment property by now but my balance sheet has taken a $170k battering due to my own fault (with $100k of that still owed to the bank!). Currently my financial situation  looks like this;

    Property: 1                                          Property: 2                                           
    Valued $460k                                     Valued $240k
    Rent    $1,560 p/m                             Rent    $900 p/m
    Owe (both properties combined)                     $333K (I.O. @ 5.04%)
    Owe (borrowed money lost)                            $100k (I.O. @ 5.04%)
    Income $45k (9-5 job) $30k (second job, casual with work being cut back)

    Over the past year I have taken up a second job on weekends and have managed to reduce the debt on the two properties (in my redraw facility) by $30k (down from $363k to $333k). I'm currently putting every extra cent I can into paying down the debt. I've learned a huge lesson out of this and it has taken me probably six months to get over the loss and how stupid I was . Anyway I've dusted myself off and it's time to move forward! I really don't want to sell a property if I can avoid it (to get rid of the $100k bad debt). Do I still have a capacity to borrow for an investment property (and I'm mindful that interest rates are on the way up!) or will I be walking the razor's edge in the future if I do? Many thanks for your opinions in advance.

    Profile photo of Richard TaylorRichard Taylor
    Join Date: 2003
    Post Count: 12,010

    Hi Gatsby

    Sorry to hear about your loss. Unfortunately there are some unscrupulous operators out there.

    From the limited amount of soft data provided you would appear to have sufficient to afford a new IP however biggest i can see is the cross collateralising of the current loans.

    Provided these can untangled then possible to move forward.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of thinkerthinker
    Join Date: 2005
    Post Count: 29

    Not sure that it really helps but it might be worth considering how you account for the capital loss on your alternative investment. My first thought would be (abeit not ideal) offsetting the capital loss against capital gains in an IP via selling one. At least then you might get something for it! You’ll need some advice on that one.

    Profile photo of gatsbygatsby
    Join Date: 2003
    Post Count: 708

    Many thanks Richard and thinker. On what I have provided how much would I be able to borrow as a rough guide? I've cut back nearly all expenses and I'm living very 'spartan' to say the least. Due to the cost of selling then having to pay entry costs again at a later date (at tomorrow's prices) I would prefer to keep the two investment properties (unless interest rates go ridiculous and I'm forced to sell). I have no other personal debt (eg, car loan, Visa card, etc) and currently renting for virtually nothing. Think of Will Smith from 'The Pursuit of Happiness' and you'll probably get the picture! As an aside I do have some shares in 'Smart Meters' which is really too early to tell but may give me a bit of light at the end of the tunnel.
    Richard if you need any more stats please pm me or I can pm you if you need anymore details. Many thanks once more.

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