For those using debt to pay debt

[Highlygeared]

Who out there uses debt to fund shortfalls on a regular basis (weekly,monthly, etc.) and how much $$$?

Has anyone done it successfully at a larger level ie the shortfall being relatively large thanks to a large, growing portfolio?

 

[Dazz]

This game we play is a pure numbers game. Everything else is secondary.

You've used the word "large" no less than three times in a one line sentence. Would you wish to put some numbers to your word large x 3. It may help those in a position to answer you.

I don't do this, so cannot comment.

 

[Highlygeared]

Well, put it this way, I would need av growth to be at least 3-4% to break even, otherwise, it wouldn't make sense to hold on and better of pruning a couple.

The shortfall is approx $50K pa in the short term. Current LOC's will last maybe 5 years. If growth doesnt materialise in that period, it might get ugly. I've factored in rental increases etc.

 

[stumunro]

i'm capitalising about 20k a year. equity buffer of about 5 years.

 

[Highlygeared]

Would you have SANF if it were twice that much? I don't atm. Is your LVR low?

 

[soyabean]

Also about 50K per year but my LOC is > 20 times and my LVR is <50% so I am comfortable.

 

[stumunro]

Would you have SANF if it were twice that much? I don't atm. Is your LVR low?

Probably, as long as i had the necessary buffers right.

LVR is high as I've just purchased . . (82%)

 

[Tim]

Well, put it this way, I would need av growth to be at least 3-4% to break even, otherwise, it wouldn't make sense to hold on and better of pruning a couple.

The shortfall is approx $50K pa in the short term. Current LOC's will last maybe 5 years. If growth doesnt materialise in that period, it might get ugly. I've factored in rental increases etc.

LVR is around 65%, but shortfall is about $80k per year (less tax I don't pay, less rent increases, plus Interest rate hikes etc).

Capital growth of about 2% per year means I break even - so I am comfortable with the equity but not comfortable with forking out so much cash to hold.

Tim

 

[Highlygeared]

LVR is around 65%, but shortfall is about $80k per year (less tax I don't pay, less rent increases, plus Interest rate hikes etc).

Capital growth of about 2% per year means I break even - so I am comfortable with the equity but not comfortable with forking out so much cash to hold.

Tim

Have you thought about selling to be on the safe(r) side? I dont want to sell
(and have never before) but it is weighing on my mind. I could end the stress right now by culling a couple but the investor/gambler in me says its worth the risk to hold for a bit longer if I can whilst going backwards.

I think and hopefully, the commencement of the next boom is not too far away in Syd.

I'd love for rents to increase by at least 10% for the next-3 to 4 yrs setting us up for the next one. But that's a pretty aggressive assumption, even in this period.

 

[Tim]

Have you thought about selling to be on the safe(r) side? I dont want to sell
(and have never before) but it is weighing on my mind. I could end the stress right now by culling a couple but the investor/gambler in me says its worth the risk to hold for a bit longer if I can whilst going backwards.

I think and hopefully, the commencement of the next boom is not too far away in Syd.

I'd love for rents to increase by at least 10% for the next-3 to 4 yrs setting us up for the next one. But that's a pretty aggressive assumption, even in this period.

Highly Geared,

yes I often think of selling down. It is not necessarily an exhilerating feeling being so negatively geared. It basically means I have to keep my full time job, however I believe that after about 3-4 years I will have enough equity to not need to work. If I sell down then all that I achieve is reducing the risk of a large protracted property slump, but miss out on any opportunity for capital growth. Risky but seems worth it..

Tim

 

[stumunro]

Have you thought about selling to be on the safe(r) side? I dont want to sell
(and have never before) but it is weighing on my mind. I could end the stress right now by culling a couple but the investor/gambler in me says its worth the risk to hold for a bit longer if I can whilst going backwards.

I think and hopefully, the commencement of the next boom is not too far away in Syd.

I'd love for rents to increase by at least 10% for the next-3 to 4 yrs setting us up for the next one. But that's a pretty aggressive assumption, even in this period.

you in this game to not loose or to win?

If your numbers add up and your buffers are ok then I think you have a good chance of success. I get the feeling you are looking to others to help you feel comfortable with what you are doing, but at the end of the day the SANF comes from inside you, and it's your self belief that will allow that.

 

[Highlygeared]

"I get the feeling you are looking to others to help you feel comfortable with what you are doing"


Thats about right....in part. I was trying to draw upon the experiences of others, apparently there aren't too many doing this.

 

[ffc1883_1996]

My LVR is around 62%. Shortfall is about $50k per year (less tax I don't pay, less rent increases, plus Interest rate hikes etc). Our accounts are set up to recycle debt as quickly as possible.

Currently nearly $300k available in LOC but I'd like to put some of that to work while I still have a full time job.

 

[GIDDO]

You guys make me feel a bit better anyway.
My LVR is 68%; and I am paying out 10k per annum from debt.

This means I need an increase of less than 1% on my portfolio to break even.

However; my paid income is not high and more precarious than many on this forum. So I need to be careful.

If the market went down 20% and stayed there for 5 years I would be a bit unhappy.

 

[gooram]

We have been doing this, but we only started about 6 months ago, and now we are parting ways so it all has to be changed again.

However until it does, we are using a line of credit to pay for IP interest and expenses as well as share purchases.

All rental income and dividends are going into an offset account on the PPOR debt which will be completely offset in the next few months.

Current LVR is 40% and the LOC is increasing about $50k/year which is about 3% of total portfolio. However once the PPOR debt is paid off, income will be redirected into the LOC until the next investment is made.

 

[imonmyway]

Has anyone done a spreadsheet for working out the costs of this, it sounds good on paper but would feel more comfortable if I could work out the actual costs

 

[DavidMc]

It's something you'll probably have to do yourself as everyones situations are just so different. Some people have share income, trusts, etc.