Hi, I know I may be dreaming but my situation is this. If anyone can help me I would really appreciate it.
I have a home on the Gold Coast worth $400000 which I still owe $225000. Even though my husband and I both work I doubt the bank would loan us more money on the equity. I desperately want to get out of the rat race but I don't want to sell my house. Here is my plan.
Sell half the house to an investor for $200000 and pay them a rent return of $200 a week for two years. This would leave me with only $25000 of debt and $175000 in equity which would put me a better position with the bank to buy a small investment unit up to $150000 Ultimately the unit would then pay for itself and I could do it again.
I have also been offered a chance to invest in a very sucure permanantly rented factory for $100000 that would also cover it's own expenses.
I have just read rich dad poor dad and the 10 steps to investing on this site. I feel like I have to this but I can't see any other financial solution. It said get creative so tell me. Am I dreaming…..
Cheers
Allison
If you have a house worth $400K why can't you get 80% of its value ($320K) less the $225 you owe, ie $95K from the bank? Assuming you could get an IP borrowing at 80% again to avoid mortgage insurance, and assuming the true cost of a house is 105% (purchase price plus 5% buying costs) then your $95K would go towards the extra 25% (over the 80% you are getting from the bank secured against the IP).
Using this logic, then $95K represents 25% of maximum investment property value you can get with current equity. Therefore you could buy house worth $380K absolute maximum.
Main issue for you of couse is the continuing $225K that is not tax deductable.
however I'm not a financial adviser, just doing exactly what I described above myself.
Thanks for the idea, I will look into that but I don't know if I can because of the original low doc loan we got. I'll ask though.
I'm still curious about selling half my house to get into a less risk situation with more capital behind me.
cheers
Hi Allison
I'm thinking more along the lines of House Call but I notice you mention that the commercial property "would also cover it's own expenses" and, I guessing this situation would make to feel more comfortable with the extra debt.
It is possible to find residential property that not only covers expenses but also puts money in your pocket each month. This would leave you in a position where the new IP would not only pay for itself but the extra cash flow would help you with the $225,000 debt on your PPOR.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Ally11 wrote:Hi, I know I may be dreaming but my situation is this. If anyone can help me I would really appreciate it.I have a home on the Gold Coast worth $400000 which I still owe $225000. Even though my husband and I both work I doubt the bank would loan us more money on the equity. I desperately want to get out of the rat race but I don't want to sell my house. Here is my plan.
Sell half the house to an investor for $200000 and pay them a rent return of $200 a week for two years. This would leave me with only $25000 of debt and $175000 in equity which would put me a better position with the bank to buy a small investment unit up to $150000 Ultimately the unit would then pay for itself and I could do it again.
I have also been offered a chance to invest in a very sucure permanantly rented factory for $100000 that would also cover it's own expenses.
I have just read rich dad poor dad and the 10 steps to investing on this site. I feel like I have to this but I can't see any other financial solution. It said get creative so tell me. Am I dreaming…..
Cheers
Allison
Hi Allison
I think you are dreaming sorry. You want to sell half the house – but what about the title and the mortgage? You would have to find someone with $200,000 cash – otherwise they would need to borrow and you would jointly need to take out a loan. If you have them $10,000 pa that is a return of 5%. They would be able to get this by putting their money in the bank.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thinking outside the box here.
Has the house got a big backyard that you could sub divide and sell off instead.How about, hmmm sell the house & buy 3-4 commercial units inside a trust, pay rent for somewhere you'd like to live (or sale with leaseback)?
Ally11 wrote:I have just read rich dad poor dad …….Just thinking about your situation again. In that book Robert Kiyosaki lists your own home as a liability. (because it traps you into paying mortgage year after year ). But then people get hooked or fall in love with where they live and choose to stay trapped. Which is where you seem to be.
On the other hand, it is the #2 Great Australian Dream to own your own home, so you're not alone.
Another thing is, if I was an investor (which I am trying to be) would be the benefit to me in tangling myself up in someone elses' house with $200K (for which I would not be able to get a loan for as no bank will accept half a house as security). I would much rather spend it on a house I own fully. Only way you could sell half would be to sign away the other half as guarantee for the investor's loan, which you can't do as your own bank holds it as security. Plus as an investor I would only see potential Issues with a capital "I" with this whole arrangement.
Not to be a wet rag….
Thanks eveyone, I suppose I am a bit of a dreamer, always have been. I'm learning so much just form reading differnt forums on this site and I hope to one day soon be able to take full advantage of these great ideas and become financially litterate. It is a great feeling to know I've got people I can ask for advise and as far as selling half the house I now know the reality of it so I will look at the other options suggested.
Thanks again for your replies, I really appreciate it.
Cheers
Ally
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