Advice for parents to be?

[Toby]

I am new to this forum and am hoping someone can give me some advice. My current situation is:

PPR value $670k, owe $405k
IP1 value $300k, owe $190k
IP2 value $750k, settlement due early 2008

IP2 is a 2 brm apartment with river views in the Perth CBD. It was purchased off the plan in early 2006 with a deposit of $50k (we used some equity from IP1 for this deposit). It was purchased for $520k.

Our situation is my wife is pregnant and will be stopping work in July 2007. Currently my income is $70k and she is on $74k. She will be returning to work after 12 months on a part time basis where her salary will then be approx $30k.

Is there any way we would be able to settle on IP2 early next year given we will only be on one income of $70k? It seems we have enough equity in our properties to do this. Would a no doc loan be an option for us, even though we are not self employed? The other option is to try and sell the IP2 prior to settlement but we are concerned the buyers finance may fall through and then we lose our deposit. Another option we have considered is selling our PPR and moving into the IP2 for a short time then sell it to avoid paying CGT. Ideally, we would love to be able to hang onto all three properties and remain in our PPR. Is this at all possible or are we dreaming??

Any advice would be greatly appreciated.

 

[Toby]

More info...

I forgot to add that my IP1 is currently rented for $210 pw.

 

[Xenia]

I can't comment specifically on your situation but going without a salary was the best thing that happened to us.
When I was expecting our first child, everyone kept telling me how busy I was going to be and how difficult it is and they were right! sleep deprevation and meeting a baby's demands 24 hours was "physically" difficult, but intellectually very unstimulating. I was very bored!!!!
I tried some mums meetings and all kinds of baby clubs but found that they were full of very non ambitious women that were happy to just stay home and change nappies
I needed to find something intelligent to do!
I used the time to learn how to trade shares, do developments, research overseas and interstate markets to buy properties, put together ideas for 2 businesses (that are now running) and fine tuned a few creative ideas on increasing cash flow.

After learning all that (during the boring times I was stuck at home with a child), we found that I did not EVER have to go back to work becasue all those things I learned totally replaced my income. Within 2 years, my husband gave up his paid job too and we are now running the businesses and investing full time.

BECAUSE WE COULDNT RELY ON ANY OTHER PAID WORK, WE HAD TO MAKE IT WORK!

I think giving up paid work is a blessing in disguise!

We are now expecting baby number 3 and putting systems in place in our business to make it automated so that I do not need to be doing the day to day stuff. I am learning to work ON our business rather than IN it. Again out of necessity!

Who knows, maybe the systems will be so good that I will never need to work in it again, just like with the job situation

 

[Toby]

one more bit of info...

If able to settle on the IP2 the weekly rent would be $600.

 

[sue78]

so you would owe $470k after $50k deposit? and collect $600 p/w rent so what's the yield? and how much do you need to top up per week? If you can afford the negative gearing part then you should be able to borrow $470k.

Just get IP2 revalued and use the equity to buy it.

I worked out weekly repayments is $655 on 7.25% I/O over 30 yrs. I think based on your income, rental estimates and your wife's part time income...you should be able to borrow fine. They should take into her account her part time income though she won't be working yet.

You could try to delay settlement to closer to July 2008, your wife could go back a few mths earlier, refinance etc

The only problem I can see is that you may not be able to rent it out straight away as there will probably be loads of apts for rent at the same time. My friend took approx 4 mths to rent hers out.

 

[wylie]

Our last loan was a Westpac lo doc because we didn't have the serviceability but our broker called it an "asset lend" because we had enough equity for the bank to be quite happy. My understanding is that we went lo doc because we didn't have to prove we could service the loan (or something like that). If we cannot pay, they are holding enough equity to cover our loans, and you sound like you are in a similar position.

We are effectively (I suppose) living off our equity until rents and values catch up. I don't plan to go back to work any time soon (maybe never) but if we get into trouble I would get a job rather than lose a house (I think).

I would advise you to see a really good broker. I really think if we had gone to a bank with our last proposal, they would have laughed at us, but our broker is one smart cookie.

Wylie

 

[Alanna]

Funny, but I don't actually recalling mentioning to my bank manager that I was pregnant when we applied for a loan on IP #2....

I would look at getting IP #2 revalued and using available equity if necessary. I also agree wholeheartedly that going without a salary when required to can actually be a blessing in disguise.