Hi Rob
If you have a loan of 200k @ 7% IO plus running costs I work out your about $80 a week short after the end of the FY assuming 30% tax.
How do you fund this difference?
Do you use the equity (56k) you withdrew?
I find the challenge is not aquiring some equity but being able to service the debt with cashflow on these -ve properties.
Cheers
Rick
OK, more numbers required, I think.
Assuming all funds in the deal are borrowed in some shape or form and a current rate of 6.31%.
Contract value $250,000
Stamps etc $12,000
Reno Costs $10,000
Interest on $272,000 @ 6.31% = $17,163 pa
Other expenses inc Strata, rates etc = $ 2,300 pa
Total Expenses
$19,463
less Total Rent income $13,520
Total Annual Shortfall = $5943 or $114 pw or $80 pw after tax
This would be the property with the largest shortfall in my portfolio.
My total monthly shortfall is around $2,000 (following some recent rate rises and rate reductions from re-financing).
I think around half of the shortfall is funded by tax breaks, which I get per pay via the ITWV I have in place, so I'm really only forking out about $1,000 from my own pocket.
I live cheap and have no consumer debt. I'm hoping some short term sacrifice will pay off in the long run and I can start to enjoy the fruits of my investment strategy.
You are quite correct, though, serviceability is the real challenge. People make negative comments about me having a J.O.B. but with out that, I'd not have a bucket load of equity in my P.O.R.T.F.O.L.I.O.
We each run our own race and play our own game.