Desperate situation..please help
- Thread starter Andrew2708
- Start date
Hi MRO,
I can cover the $7Ok loss on Mackay. My thoughts are refinancing my PPOR and covering the loss this way, as both properties are with the same bank.
Is this a good strategy?
I can cover the $7Ok loss on Mackay. My thoughts are refinancing my PPOR and covering the loss this way, as both properties are with the same bank.
Is this a good strategy?
what are the prospects for growth on either property and how much are they each costing you per year to hold?
Mackay property: Eimeo is typically row after row of cookie cutter properties. I highly doubt there is scope to subdivide. Zero chance of any commercial venture. Shared accom most likely way to increase rental income, but being from a distance will be hard to self manage, and very few (more likely zero) PMs up here would touch it.
Blackwater: I dont know the property obviously, but I would expect the same as above. Possibly a renovation to spruice up, but there just isnt any demand for accomodation there.
pinkboy
Your PPOR at Baulkham Hills could get really good value if you sell it as there is lot of people willing to pay premium right now, to offset your losses at Blackwater IP. Then rent somewhere in Sydney.
Of course being PPOR you may not want to sell it as it is hard to get back into Sydney once sold .... But it should be at top of the cycle soon if not already.
Not sure how CGT works out in in terms of selling Baulkham Hills and Blackwater (and Mackay if necessary) in the same financial year.
You definitely need to see accountant first before doing anything else.
Mind you though Baulkham Hills could get further leg up in prices when NWRL construction is completed. However that is 2019 you are looking. You need to fight your fire right now and you may have to sell your PPOR if necessary.
Of course being PPOR you may not want to sell it as it is hard to get back into Sydney once sold .... But it should be at top of the cycle soon if not already.
Not sure how CGT works out in in terms of selling Baulkham Hills and Blackwater (and Mackay if necessary) in the same financial year.
You definitely need to see accountant first before doing anything else.
Mind you though Baulkham Hills could get further leg up in prices when NWRL construction is completed. However that is 2019 you are looking. You need to fight your fire right now and you may have to sell your PPOR if necessary.
Last edited:
Unfortunately there are no good options, the Mackay property should turn around rent wise, it's not a one industry regional centre, $300 per week sounds too low. Market should eventually stabilize but there are lots of units nearing completion on the banks of the Pioneer river
Have you considered shopping around for a slightly cheaper insurance policy? Often when you switch you can obtain a better deal.
The Blackwater property is probably a different story, the options are sell now at a large loss or hold on with a large -ve cash flow each year.
Would hate to have to sell ppor but it depends on your personal cash flow.
Hope everything works out okay for you
Have you considered shopping around for a slightly cheaper insurance policy? Often when you switch you can obtain a better deal.
The Blackwater property is probably a different story, the options are sell now at a large loss or hold on with a large -ve cash flow each year.
Would hate to have to sell ppor but it depends on your personal cash flow.
Hope everything works out okay for you
Sometimes it's a waste of emotions to think too deep,have not been up Eimeo for a long time but it was always one of those standout area's in nth qld,not so sure on mining towns Australia wide and I don't think it's going to get any better in the near future,so look at it like this everything in life is sent to test you and no one not the even the fast buck property gurus know what will happen in six months - 2 years time,or this is all just a bump in the road on your investing path we have all been there,good luck because you are not the only one in this boat..
you have to assume the worst case scenario, which is property prices and rental income stay low for an extended period of time.
I'd be looking reducing your debt as quickly as you can, you need to get those properties to neutrally geared as quick as possible.
cut spending/ get another job etc just anything to get the debt down.
other option is to sell up everything and start again. would be very painful and my least preferred option.
I'd be looking reducing your debt as quickly as you can, you need to get those properties to neutrally geared as quick as possible.
cut spending/ get another job etc just anything to get the debt down.
other option is to sell up everything and start again. would be very painful and my least preferred option.
Is Blackwater cross collateralised with anything. Have you got depreciation schedules on the properties? Have you done an income tax variation? When are your loans fixed until? Is Blackwater leased at the moment? If it's leased what do you need to do to the place to keep it attractive to rent? What's your situation if Blackwater becomes vacant?
Have you done a budget? What is your position for each 1% increase in interest rates?
You need to plan now eg
if x happens, then I will do y
if z happens, then I will do a etc
If you don't have a clear strategy you will be likely to delay making the right decisions, as we all tend to be optimistic.
If you sell Mackay or Blackwater or both can the interest you pay on any loans to pay out the shortfalls be tax deductible? How do you need to structure if this is a possibility? Get good advice and follow it.
Planning will be your key.
Have you done a budget? What is your position for each 1% increase in interest rates?
You need to plan now eg
if x happens, then I will do y
if z happens, then I will do a etc
If you don't have a clear strategy you will be likely to delay making the right decisions, as we all tend to be optimistic.
If you sell Mackay or Blackwater or both can the interest you pay on any loans to pay out the shortfalls be tax deductible? How do you need to structure if this is a possibility? Get good advice and follow it.
Planning will be your key.
Are you cross collateralised? If the syd property is not crossed I would seriously consider refinancing enough cash out to give you some breathing room for a few years to see if the properties can recover. Obviously can not be a long a term strategy.
You also mention when your fixed rate expires and rates go up. Rates are going down so that really shouldn't be too much of a concern. You may be able to extend for a longer IO period depending on the lender.
For others reading this thread I know us brokers on here harp on about flexibility and avoiding X-coll...well here is a good example of why.
You also mention when your fixed rate expires and rates go up. Rates are going down so that really shouldn't be too much of a concern. You may be able to extend for a longer IO period depending on the lender.
For others reading this thread I know us brokers on here harp on about flexibility and avoiding X-coll...well here is a good example of why.
Hi,
Accountant advice will help, especially when it comes to taxation matters.
Accountant may help out with a cost analysis, exit proposal and maybe a bit of assistance.
It might sound simple but there could be other things that may help or effect the person
Accountant advice will help, especially when it comes to taxation matters.
Accountant may help out with a cost analysis, exit proposal and maybe a bit of assistance.
It might sound simple but there could be other things that may help or effect the person
If you can afford to hold out for 2 years + I would do that.
mining is a cycle.
Coal price rises
miners expand their operations
buy new equipment for these expansions
hire more staff/contractors
produce more coal =
More coal on market =
Prices fall
miners look to cut costs
sack staff and contractors
cancel rebuilds and maintenance
less profitable operations close
= flow on to the local property market.
Now wait for the demand to catch up with supply.
I work for a major miner and I was recently in mackay for some toe cutting unfortunately. I was shocked at the amount of motel rooms vacant. crazy. All of our contractors are undercutting each other for the work we are paying 50% less than we were 2 years ago.
But it's a cycle. You get plenty of idiots that claim it's dead forever. But it isn't. We have new clients signing 30+ year coal supply contracts regularly.
James
mining is a cycle.
Coal price rises
miners expand their operations
buy new equipment for these expansions
hire more staff/contractors
produce more coal =
More coal on market =
Prices fall
miners look to cut costs
sack staff and contractors
cancel rebuilds and maintenance
less profitable operations close
= flow on to the local property market.
Now wait for the demand to catch up with supply.
I work for a major miner and I was recently in mackay for some toe cutting unfortunately. I was shocked at the amount of motel rooms vacant. crazy. All of our contractors are undercutting each other for the work we are paying 50% less than we were 2 years ago.
But it's a cycle. You get plenty of idiots that claim it's dead forever. But it isn't. We have new clients signing 30+ year coal supply contracts regularly.
James
Unfortunately the mining cycle is much longer than 2 years. It's probably 7-10 years.
Dear Andrew,
sorry to hear about your situation, believe me we feel you pain
we asked ourselves these questions
will these places hold you back? what is your best chance of being able move forward?
the quote about not going through life looking in a rear vision mirror has helped us to map out future paths, I think of where we will be in 5-10 years times and these mistakes will seem insignificant.
https://medium.com/@mgebbs/you-cant-drive-forward-looking-through-a-rear-view-mirror-5997f3f67902
we are looking at refinancing a place in sydney and selling one of ours in negative equity my question is for mortgage brokers or people that have been in this situation before.
our refinance has been approved (different bank) but what if the funds arent available before the settlement. would the bank be able to do some sort of short term bridging finance if the money was coming? untill we can pay out the shortfall?
thanks and all the best
They will not let you settle the sale until there is sufficient funds to release all mortgages if you are refinancing. It will likely have to be simultaneous settlement for the sale and refinance. Get your lawyer for the sale involved asap.
Andrew, IMO and I am not providing financial advise the decision you take will come down to your personal circumstances and ability to service the debts.
Will the residential property markets recover in the short term in Blackwater and Mackay? Again, IMO very very unlikely - Coal mining investment is ex-growth and supply is likely to exceed demand for now and anytime in my lifetime.
Frankly your position is a poor indictment on the financial advisory and property market in general and it is inexplicable how you arrived in this position.
I would be questioning the following:
1. How the bank valuations supported your investment loans?
2. How the mortgage brokers or bank assessed the risks and your financial position?
3. How your financial advisor (if you had one) could recommend leveraging into a single asset class beholden to commodity prices and whether they clearly outlined the risks associated with this class of investment?
4. How the real estate agent represented the investment potential and risks associated with the property?
5. Wether the councils were complicit in limiting supply and driving up short term rental returns in favour of asset price increases and whether there were any conflicts of interests associated with these policies?
6. Who was spruiking this investment and were there representations of risk / return accurate?
Ask your solicitor whether you have any recourse to any or all of these parties - perhaps see whether there are others in the same boat to determine the merits of a class action against one or all of the above.
Alternatively you can roll over without a fight and start again.
Best of luck with your outcome.
Will the residential property markets recover in the short term in Blackwater and Mackay? Again, IMO very very unlikely - Coal mining investment is ex-growth and supply is likely to exceed demand for now and anytime in my lifetime.
Frankly your position is a poor indictment on the financial advisory and property market in general and it is inexplicable how you arrived in this position.
I would be questioning the following:
1. How the bank valuations supported your investment loans?
2. How the mortgage brokers or bank assessed the risks and your financial position?
3. How your financial advisor (if you had one) could recommend leveraging into a single asset class beholden to commodity prices and whether they clearly outlined the risks associated with this class of investment?
4. How the real estate agent represented the investment potential and risks associated with the property?
5. Wether the councils were complicit in limiting supply and driving up short term rental returns in favour of asset price increases and whether there were any conflicts of interests associated with these policies?
6. Who was spruiking this investment and were there representations of risk / return accurate?
Ask your solicitor whether you have any recourse to any or all of these parties - perhaps see whether there are others in the same boat to determine the merits of a class action against one or all of the above.
Alternatively you can roll over without a fight and start again.
Best of luck with your outcome.
This kind of attitude makes investing harder for the rest of us. Bank lending gets harder, you will require legal advice prior to every move, real estate agents will become less helpful in fear of being taken to court. I completely disagree with your advice to pursue everyone else. The risk in these purchases should have been obvious to all involved.
Risk and return, you cant expect to earn 15%+ return on a rental in the middle of nowhere without some kind of associated risk.
Good old fashioned personal responsibility is required. An expensive and difficult lesson has no doubt been learnt, use that and move on.
