HELP: Advice and opinions URGENTLY needed.

[weg]

Hi Josko,

Well you've esbablished one thing that's for certain, and that is that you do need to do something.

Like some others here I believe that it will only take a small but negative change in circumstances to really tip things over the edge. I think you already know this and don't really want to take the risk by continuing to live on the edge.

If selling some IP's cannot get you back to a financial comfort zone then selling the PPOR may unfortunately be your only option.

I love my PPOR too so I absolutely know where you're coming from, but if holding onto it means you are risking losing even more, then that defeats the purpose of what you are trying to achieve and how you aspire to live.

If you put yourself back into a sound financial position, there will be the opportunity to buy yourself an equally lovely PPOR in the future.

I am with alot of others here, in that I think the market will stay flat or may drop even further, even with further decreases in interest rates.

Wishing you the very best, and I'm sure things will work out in the end. You do have a lot of equity in your PPOR after all, just make sure that you hold onto it.

 

[nonrecourse]

Yes, The issue is Cashflow.

Our nearest IP is only 2BR! Hubby suggested it and I would not mind as we could renovate while in there. Plenty of room to add a bedroom but it would mean a 10yr old, an 8 yr old and a baby in one room.



Regards JO

Hi Josko. If you go back and look at my posts for a year now I have been warning SS about a soft financial depression where access to funds will dry up and have been labeled a doom and gloomers. Like you we had 7 properties. We recently sold our least valuable property to wipe the last of our non investment debt that had built up over the years because of our agressive borrowing for IP's and very heavy monthly mortgage repayments. We have borrowed up to 120% using our equity when times were good.

We sold our dream PPR back in 2003 and have rented since. We did what you are thinking about, stayed in the area, rented a house with a pool and saved $6000 a month. That enabled us to go to the next level with our investing from the proceeds of selling the PPR.

In July last year I realised from surfing on the net that the subprime debacle was something that was going to have profound world wide consequences that could wipe us out unless we changed tack. It has taken us a year to sell that one property. Our property portfolio is all blue chip but its like turning a cruise ship around when we wanted to reduce our exposure. Its slow turning. I just hope you have enough time.

You should pay attention to your gut feelings and ignore the chatter that says don't sell your PPR. You have made the right choice, your using your financial brain rather than your emotional brain. Yes hubby and your children will initially view moving into a rented house as a step back. That will last until something breaks and the landlord has to dish out serious money

It has taken time but both my kids and wife realise that owning a PPR is not a smart choice when it comes down to owning 6+ investment properties or a flash PPR. There are about 12,400 individuals and families in Australia that own 6+ properties. Those statistics come from the ATO.

 

[Stella]

I have to agree with those saying sell anything except the PPOR - if I was in your shoes thats what I would be doing - right or wrong!
Although I am new at all this, from my perspective, with a happy family nothing 'material' else really matters! I have seen too many friends caught up providing for their future, only to suddenly not have a future due to accident or illness or other unforseen circumstances.

Live for now - by all means certainly still plan for the future, but not at the total expense of living now while you are able to enjoy.

Owning a PPOR may not be the most wisest financial decision but if something as simple as a pile of bricks & mortar gives your family so much enjoyment why not keep the PPOR you all love & see it as a reward for your struggles to date? Even though prices have been decreasing, hopefully you can sell for at least what you paid & costs? Sell off as many IP's as you need to & start over again whenever the property wagon starts to pick up speed again? You may not come out of it with a fortune, but you will come out of it with a family & get back to sleeping.
That way you may even start off refreshed & thinking clearer and make even better business decisions then?

Regardless of which way you go, I wish you all the best - everyone deserves to have they best they can in life - whatever that 'best' may be!

Cheers
Stella

 

[evand]

I didnt know there was a spreadsheet to calculate the impact on a family of selling the family home hen you you have other options.

Sometimes - especially with a family - its about a lot more than the numbers alone.

Goanna, you've just contradicted everything Jan Somers taught.

I can't help but feel your analysis is confounded by ignoring Jo's and hubby's tax strategy. I'd have to spreadsheet it to work out what the breakevens were on selling ppr vs ip's. How about you?

 

[nonrecourse]

I didnt know there was a spreadsheet to calculate the impact on a family of selling the family home hen you you have other options.

Sometimes - especially with a family - its about a lot more than the numbers alone.

Josko is going backwards at a rate of $12,000 a month I think the numbers are directly related to an impact on the family happiness. The alternative is called bankruptcy. From my post above I mentioned that only 12,400 investors own 6+ properties because the use their right brain rather than the left. So many SS posters talk the talk but refuse to walk the walk.

 

[GoAnna!]

I take your point non recourse but the family home is not the main cause of that cashflow drain. If she solely sold the PPOR that nestegg would be gradually eaten away by the other $8K -$9K per month shortfall.

I don't know how close to the edge she is. I know what riding close to the edge feels. We have been there this past year. Not a pleasent experience. I agree it's time to be rational but I don't believe that selling the PPOR is rational unlesss her circumstances dictate it. Putting aside the fact that it is her family home and that her husband sounds less than enthusiastic in selling it, the property would need to drop about 20% for there to be no loss were she to buy back in in 2 years time. Her PPOR sounds like her bst performer. It should provide ample equity for her to re enter the market when the time is right plus whatever other ips she is able to retain.

 

[evand]

The answers to life's problems are not found in spread sheets. What did people do before the introduction of spreadsheets 20 years ago...LOL

It sounds to me you think there is some badge of honer in being in that group of 12,400 investors. Whether or not i'm part of that group, I get my self esteem elsewhere.

Josko is going backwards at a rate of $12,000 a month I think the numbers are directly related to an impact on the family happiness. The alternative is called bankruptcy. From my post above I mentioned that only 12,400 investors own 6+ properties because the use their right brain rather than the left. So many SS posters talk the talk but refuse to walk the walk.

 

[nonrecourse]

I take your point non recourse but the family home is not the main cause of that cashflow drain. If she solely sold the PPOR that nestegg would be gradually eaten away by the other $8K -$9K per month shortfall.

I don't know how close to the edge she is. I know what riding close to the edge feels. We have been there this past year. Not a pleasent experience. I agree it's time to be rational but I don't believe that selling the PPOR is rational unlesss her circumstances dictate it. Putting aside the fact that it is her family home and that her husband sounds less than enthusiastic in selling it, the property would need to drop about 20% for there to be no loss were she to buy back in in 2 years time. Her PPOR sounds like her bst performer. It should provide ample equity for her to re enter the market when the time is right plus whatever other ips she is able to retain.

GoAnna; Lehman Brothers one of the top 5 US investment Banks is failing this morning and it is on the front page of the fin review. Josko has one chance to protect her family. No one in their right mind is purchasing investment property at the moment unless they are totally cashed up as it is a buyers market. The family home is a different kettle of fish and from my reading her only chance to get out of jail. Another family with stars in their eyes will "invest" in a flash PPR and but with their heart rather than their head paying close to full value.
If Josko sells up, moves into a rental property and uses some of the funds to pay down some of her deductable debt and holds some cash for the free fall that is about to happen then her and her family will continue to prosper. They have two good sources of income from their professions.

We are now approaching the end of the beginning phase of the financial tsunami that is about to unfold. I am betting we are going to see a full on stock market crash some time in the next six weeks. If after Lehman's failure Morgan Stanley or more likely Merril Lynch fails the liquidity crisis will find most investors exposed to something their grandparents experienced in the dirty 30's.

As for her PPR being her best performer how many liquid dollars does it provide for her to put against her $12,000 black hole each month. None zilch, its just a middle class illusion of an investment. In six to 8 weeks it will be a milstone around her families neck that will drown them in red ink because she won't be able to sell when the financial tsunami washes over us.

 

[evand]

Are you saying Josko should sell her family home because there is a financial tsunami coming? Dude, what are you on?

Imagine if she received that advice from a professional in the financial industry (FA, accountant etc) let alone a stranger on a forum. Weird indeed!

You dont know that is going to happen, you just think it will.

And that thing you strangely call a "middle class illusion" is a place her kids come home from school to. Provide the families memories with kids growing up. etc etc I could go on and on but you get the point. Its their bloody HOME mate.

I am the poster boy for non emotional business and investing decisions. I deal only in facts, I call a spade a spade and make decisions the same way. But to me the family home is not negotiable.

There is really no need to sell it to be a successful investor and i find it absolutely bizarre that anyone would think so. It should be kept separate from the whole deal (emotionally and financially) and only used as equity when required and then pulled out asap.

GoAnna; Lehman Brothers one of the top 5 US investment Banks is failing this morning and it is on the front page of the fin review. Josko has one chance to protect her family. No one in their right mind is purchasing investment property at the moment unless they are totally cashed up as it is a buyers market. The family home is a different kettle of fish and from my reading her only chance to get out of jail. Another family with stars in their eyes will "invest" in a flash PPR and but with their heart rather than their head paying close to full value.
If Josko sells up, moves into a rental property and uses some of the funds to pay down some of her deductable debt and holds some cash for the free fall that is about to happen then her and her family will continue to prosper. They have two good sources of income from their professions.

We are now approaching the end of the beginning phase of the financial tsunami that is about to unfold. I am betting we are going to see a full on stock market crash some time in the next six weeks. If after Lehman's failure Morgan Stanley or more likely Merril Lynch fails the liquidity crisis will find most investors exposed to something their grandparents experienced in the dirty 30's.

As for her PPR being her best performer how many liquid dollars does it provide for her to put against her $12,000 black hole each month. None zilch, its just a middle class illusion of an investment. In six to 8 weeks it will be a milstone around her families neck that will drown them in red ink because she won't be able to sell when the financial tsunami washes over us.

 

[GoAnna!]

There are ways to get equity out other than selling the property holding the most free equity.

Equity swaps can shift the equity to an ip for sale, preferably freeing up that title entirely. Depending upon how she is structured finance wise this would remove the risk of a bank seizing the proceeds of sale.

Unless all the figures are available plus a fair assessment of each properties performance in the coming few years we are all just making up assumptioms based on the scarce information available to date.

Obviously other things to look at are refinancing out of high interest loans, maximising returns of existing properties. The cost of rent versus the cost of current mortgage has to be factored in when looking at the cool hard facts.

Non recourse I don't know your story to know whether you are speaking from personal experience or not but from an investmest perspective and high debt gloom and doom usually means lowering interest rates and lowering costs. For me the critical thing is interest rates and finance structure. Yield comes a poor third. At this stage of the cycle it is all about cashflow. It's those that are forced to dump that take the hit. It's no time to panic and jump at shadows. It's time to take a long cool look at the situation and protect the things of highest priority - for me it is my family, my marriage, my children, health (stress included in this area), my home and my top performing investments. It's not the time to hang onto the stuff that is unlikely to perform in the medium term if holding will cause you financial stress or worse. It's not a great time for greed or ego or paniced responses.

 

[nonrecourse]

GoAnna;
Your spot on about interest rates falling but for Josko that will be cold comfort because she and many others on this site are in for a shock when they go back to their banker to access their "equity"

My father was a teenager in the great depression and he use to say when times are tough banks only lend to people who don't need it, cause its easier to get it back when the s*** hits the fan.

Josko & co has serious fiscal cancer and it will eat her and her family alive unless she reduces her discretionary spending beyond her current efforts. YOUR FAMILY HOME IS NOT AN ASSET IT IS A LIABILITY. She can't sell her investment properties because its a falling market investors are standing around with their hands in their pockets waiting for the coming crash.

That is not my opinion that's the present reality. The real tragedy is that few SS investors own their property through trusts. That is a discretionary trust that holds units in a unit trust that hold the investment properties. Its called asset protection. The other option is to diversify by also having some commercial properties in a unit trust (a trevisan trust) that owns commercial real estate that is controlled by your super fund. The third pillar is your business or employment and this is where Josko & Hubby have the spade to dig themselves out provided they have the fiscal rectitude to go the extra mile and forget about the tall poppie cutting wanabees.

That wanabee title does not include you GoAnna your posts are analytical and well thought out. Just because I don't agree with you doesn't mean your wrong Life is not black and white there is just varying shades of grey. We all have clay feet that is why some pencils have erasers tacked on the top.
My doom and gloom as you call it is based on a sound probability that after the mother of a boom directly related to CDO's and the fractionalised banking system we are headed for the balancing mother of a crash

 

[tobe]

Ive got 2 cents.... If she has the IPs on the market, and they dont sell, and she falls behind on the repyaments, the banks foreclose, and there is a short fall, and they make her go bankrupt, isnt her PPOR exempt? If she sells the PPOR, or converts it to an IP, then she is perhaps in an even more precarious situation, as under bankrupcy laws they can then be sold by creidtors much more easily.
Perhaps another solution is to approach Mobius et all and ask for a repyment work through plan, be upfront and see if there is another solution they can offer. I think it would be prudent to explore that option before making any other changes, which may end up in a really dire position...

 

[GoAnna!]

I am not sure that we completely disagree non recourse.

Interest rates are not the whole answer. Clearly they are only part of the consideration in finding the right answer.

Properties WILL need to be sold. I guess I have a different view on which properties should be at the front of line to be sold off. The key is sustainable cashflow, peace of mind and happy family. If I could avoid selling the golden goose I would. If I could avoid selling the family home I would. I would, if at all possible, begin with the under performers even if it meant selling at a loss assuming that then bettered my cash flow position.

In the end it all comes down to cashflow.

I know which of my properties are most likely to be sold should life not pan out as I assume it will right now.

 

[nonrecourse]

The tall poppie syndrome is alive and well on SS

The answers to life's problems are not found in spread sheets. What did people do before the introduction of spreadsheets 20 years ago...LOL

It sounds to me you think there is some badge of honer in being in that group of 12,400 investors. Whether or not i'm part of that group, I get my self esteem elsewhere.

Evand what your post demonstrates is good ole aussie envy with a liberal dose of tall poppie syndrome. Fiscal pygmies like to justify why they will never compromise their middle class values but instead will sneer at those that seperate themselves from the herd.
I take it you read the funnies in the sun; as the proof you and your tall poppie cutting mates on SS keep demanding is all around you but I guess Maths and English were never your strong suit in junior high.

Get someone who can read to explain this link below to you

http://www.guardian.co.uk/business/feedarticle/7793758

Yes you are certain its those nasty newspapers making it up again isn't it evand

 

[evand]

Sorry mate, i don't know where the tone of your post came from. I have been reasonably successful in business & investing for quite a while. To the point where i can sit here doing squat all day, every day if i like (and i do like) while a new kitchen is being installed in my PPOR.

I dont share the tall poppy syndrome that you mention and dont get your point about the "middle class values"

Are you suggesting that if Josko holds her PPOR she is uncompromising in her middle class values so she can show off her PPOR?

I think you extrapolating your own beliefs and values to others?

And i cant see the relevance of you mentioning that only 12400 investors in Australia own more than 6 IPs. What does that have to do with helping Josko with her situation?

I can accept that it might be important to you to be part of that group, but maybe not everyone else.

Evand what your post demonstrates is good ole aussie envy with a liberal dose of tall poppie syndrome. Fiscal pygmies like to justify why they will never compromise their middle class values but instead will sneer at those that seperate themselves from the herd.
I take it you read the funnies in the sun; as the proof you and your tall poppie cutting mates on SS keep demanding is all around you but I guess Maths and English were never your strong suit in junior high.

Get someone who can read to explain this link below to you

http://www.guardian.co.uk/business/feedarticle/7793758

Yes you are certain its those nasty newspapers making it up again isn't it evand

 

[nonrecourse]

Your liability is not limited

Ive got 2 cents.... If she has the IPs on the market, and they dont sell, and she falls behind on the repyaments, the banks foreclose, and there is a short fall, and they make her go bankrupt, isnt her PPOR exempt? If she sells the PPOR, or converts it to an IP, then she is perhaps in an even more precarious situation, as under bankrupcy laws they can then be sold by creidtors much more easily.
Perhaps another solution is to approach Mobius et all and ask for a repyment work through plan, be upfront and see if there is another solution they can offer. I think it would be prudent to explore that option before making any other changes, which may end up in a really dire position...

Unless you have a limited recourse loan, i.e you have a 50-60% deposit on the IP mortgage most IP loans have an all monies clause and personal guarantee's to boot.

So no you go straight to jail you don't skip past go and you don't collect $200

 

[nonrecourse]

I don't know how I can make it any clearer

Sorry mate, i don't know where the tone of your post came from. I have been reasonably successful in business & investing for quite a while. To the point where i can sit here doing squat all day, every day if i like (and i do like) while a new kitchen is being installed in my PPOR.

I dont share the tall poppy syndrome that you mention and dont get your point about the "middle class values"

Are you suggesting that if Josko holds her PPOR she is uncompromising in her middle class values so she can show off her PPOR?

I think you extrapolating your own beliefs and values to others?

And i cant see the relevance of you mentioning that only 12400 investors in Australia own more than 6 IPs. What does that have to do with helping Josko with her situation?

I can accept that it might be important to you to be part of that group, but maybe not everyone else.

Evand; I'm not yer mate. If you read her post she has 7 investment properties. She also has a significant shortfall from her rental properties that are gobbling her up and as she pointed out something has to give. She can't sell her investment properties and if she is under water on the yields and no one will pay her anywhere near what she need to obtain to remain solvent with regard to her IP's. Is it such a difficult concept to understand that owning your own home is a discretionary expense? Most people view their home as an investment. Guess what your bank views your home as; their investment ! Your on the other side of the balance sheet

As for Josko she has managed to acquire more property than most. The question she is asking herself does she want to be like everyone else and live the lie that her home is an investment or does she want to be financially independent. As for what's important to me I'd like to see Josko succeed. I think a lot of other posters would rather she didn't.

If you want to argue that money isn't everying your right if you want to collect the old age pension and be part of the 80% of Australians who depend on the government in old age.

 

[evand]

My reply in blue below.

Evand; I'm not yer mate.

Cute...thanks.

If you read her post she has 7 investment properties. She also has a significant shortfall from her rental properties that are gobbling her up and as she pointed out something has to give. She can't sell her investment properties and if she is under water on the yields and no one will pay her anywhere near what she need to obtain to remain solvent with regard to her IP's.

The market doesnt distinguish between IPs & a PPOR. If she is having trouble selling her IP's she will have trouble selling her PPOR. In fact probably more so as the Central Coast market is deader than most. (i'm not sure where her IPs are)

Is it such a difficult concept to understand that owning your own home is a discretionary expense? Most people view their home as an investment.


I disagree. And even if you were right, most people's families don't.


Guess what your bank views your home as; their investment ! Your on the other side of the balance sheet

Not my home, i own it outright.

As for Josko she has managed to acquire more property than most. The question she is asking herself does she want to be like everyone else and live the lie that her home is an investment or does she want to be financially independent.

As for what's important to me I'd like to see Josko succeed. I think a lot of other posters would rather she didn't.


I get your implication here and its so wrong. If she doesn't sell her PPOR doesn't mean she is heading for failure.

If you want to argue that money isn't everying your right if you want to collect the old age pension and be part of the 80% of Australians who depend on the government in old age.

Sorry, not me. I retired independently at about 40.

 

[josko]

GoAnna;
Your spot on about interest rates falling but for Josko that will be cold comfort because she and many others on this site are in for a shock when they go back to their banker to access their "equity"

My father was a teenager in the great depression and he use to say when times are tough banks only lend to people who don't need it, cause its easier to get it back when the s*** hits the fan.

Josko & co has serious fiscal cancer and it will eat her and her family alive unless she reduces her discretionary spending beyond her current efforts. YOUR FAMILY HOME IS NOT AN ASSET IT IS A LIABILITY. She can't sell her investment properties because its a falling market investors are standing around with their hands in their pockets waiting for the coming crash.

That is not my opinion that's the present reality. The real tragedy is that few SS investors own their property through trusts. That is a discretionary trust that holds units in a unit trust that hold the investment properties. Its called asset protection. The other option is to diversify by also having some commercial properties in a unit trust (a trevisan trust) that owns commercial real estate that is controlled by your super fund. The third pillar is your business or employment and this is where Josko & Hubby have the spade to dig themselves out provided they have the fiscal rectitude to go the extra mile and forget about the tall poppie cutting wanabees.

That wanabee title does not include you GoAnna your posts are analytical and well thought out. Just because I don't agree with you doesn't mean your wrong Life is not black and white there is just varying shades of grey. We all have clay feet that is why some pencils have erasers tacked on the top.
My doom and gloom as you call it is based on a sound probability that after the mother of a boom directly related to CDO's and the fractionalised banking system we are headed for the balancing mother of a crash

I've quoted Nonrecourse because it was the last post and a good place to start.

I really appreciate your input everyone, and take the advice as I see fit.

There are people on this forum I have come to heed, because of their obvious experience and sound advice given freely and unobjectively to others. In saying that, ultimately, this is my decision and I have never been one to blame others for anything I do. I would much rather be talking to you guys than friends who will be absolutely horrified and be whispering "I told you so," when the house is sold.

I'll make points to shorten the post.

1. I have tried to sell off one of my best IP's at Beenleigh. It kills me to do it, It SHOULD be worth about 309k now. A similar house on a smaller block 4 doors away sold two months ago for $329k. I know though, a house is only worth what someone is willing to pay for it! It costs me an extra $1300/month. It is on 890sqm.
here it is.
www.realestate.com.au/cgi-bin/rsearch?a=o&id=104962259&f=50&p=10&t=res&ty=&fmt=&header=&cc=&c=78159278&s=qld&tm=1221450331

2. I have also been trying to sell my large 3BR aprtment at Biggera Waters. The loan is costing me NG $2500/month. ( Not including rates, insurance etc.)
As Nonrecourse mentions, I have lost 10% in value at least on this property, and the loan is now 100%LVR with Mobius. I cannot refinance it.

www.realestate.com.au/cgi-bin/rsearch?a=o&id=104931754&f=0&p=10&t=res&ty=&fmt=&header=&cc=&c=40364445&s=qld&tm=1221451088

3. If I could offload these two, I would save the PPOR, and think about moving out to rent. I have been trying for 3 months and will not/cannot wait much longer.

4. My local IP has lost 15%. The market is so dead here, that it will probably just sit there for 6 months anyway.

5. I have two properties side by side now with DA approval for 5 townhouses at Scarborough. I have planned to hang onto them as I consider them to be my best investments (with Commercial) and I see way too much potential there. The market there is stable....I may walk away having lost nothing but I would so very much kick myself for selling them.

6. Commercial property definately no go. Even hubby agrees with me on this one.

7. GoAnna, it is all about cashflow for me. But I have to agree with Non-recourse. Call me brainwashed by years of reading and thousands of dollars spent with my accountant, but the family home is bad debt. My family home is by biggest liability by far. Stella, your family home IS THE material possession. I am a realist, and I honestly can feel the weight lifting at the thought of losing the debt on our PPOR.

8. I thought an equity swap would be the answer, but Biggera Waters has dropped so much that I will not be much better off. If tougher times ARE ahead, I'll probably end up in hot water again.

9. I see what a few of you are saying, GoAnna, Evan, about the family home. I appreciate your opinions and feelings attached to your home. I truely believe my children will be happy as long as we are. We will stay in the same area and I hope to rent somewhere more modern and with a backyard! Our PPOR's backyard has been eaten up by the flat attached to it.

10. If, and i mean a big IF, we can sell the home now, and get the "right" price, we can lower the debt on our higher NG IP's.

11. I am still going to sell two IP's.

weg:

I love my PPOR too so I absolutely know where you're coming from, but if holding onto it means you are risking losing even more, then that defeats the purpose of what you are trying to achieve and how you aspire to live.

Weg you have it in a nutshell.


I hope I have answered most questions. I'm supposed to be working! he he!

I have an agent coming tomorrow to advise of my selling price......

Regards JO

 

[evand]

Josko,

Good luck with it and keep us informed. All the best.