Help Needed Please!!!

[Julles]

Hi everyone I'm new and have spent the last two days reading near on every part of this forum trying to come up with an answer for Hubby and my's situation.

We are both 45 he is the main income earner and I have been the stay at home mum without income all of this time.

He earns gross $50000 a year and we have raised 3 kids on this and less sometimes and still managed to buy our prinnciple place of residence which is Water Front in River Heads / Hervey Bay Queensland. The value of this has risen (value today around $550000 - $600000) since we bought so we have around $200 000 equity but still owe $260 000 on the I + P loan.

With the interest rate rises happening this year we are worried that we may not be able to service our loan and eat at the same time. Plus pay his petrol costs to work (averaging $100 a week) with the distance (I've had no luck getting that part time job to help either)

We've never thought to invest in another property as the serviceality on a ip was a worry while the kids lived with us. Now they are independant we can ---- Please share your opinions

1. Take out an interest only loan for more money on the ppor to have 20% deposit on an IP and then borrow the 80% on the IP? (servicing both could prove difficult I've worked out we'd need his whole take home pay to pay this mortgage and the shortfall of the IP !!) ??

2. Sell up out of this growth position currently rising at 10% per annum) they aren't making anymore waterfront) and start again by owning our residence in a growth area outright and then going for property investments?

3. Higher risk but willing to give it a shot to hang onto our waterfront find a broker who could find us a lender who would lend us a line of credit for the maximum amount on our Ppor.

Buy the Ip and renovate (we are great at that) leaving the buffer of funds to drawn on to take up the short fall in both loans and costs assciated with owning properties. This would have to be a short term plan for the IP anyway. Max 2 years

Any other suggestions or better way to go around it? Idealy we'd like to keep this place but as rents aren't particularly good in this area (fishing village) we can't think about renting it out consistently So that's it


All opinions and help appreciated. Thanks Julles

 

[steveadl]

With the interest rate rises happening this year we are worried that we may not be able to service our loan and eat at the same time. Plus pay his petrol costs to work (averaging $100 a week) with the distance (I've had no luck getting that part time job to help either)

1. Take out an interest only loan for more money on the ppor to have 20% deposit on an IP and then borrow the 80% on the IP? (servicing both could prove difficult I've worked out we'd need his whole take home pay to pay this mortgage and the shortfall of the IP !!) ??

Welcome to SS Julles!

I'd like to ask you, if you are worried about interest rate rises putting you in a position where you can't afford to service your loan - have you thought about fixing your rates? This way you hopefully won't be put in a position where you may be forced to do something you don't want to (eg. refinance, sell etc). Also gives you more certainty on your finances.

That aside, in point 1 - you have given a big indicator of what you can and can't afford. If it will take your entire income to service the existing loan and a new IP - perhaps you may be stretching yourself too far?

Don't want to pry, but now that the kids have left home - is there any chance of you getting a part time job? The income you earn could be put towards investing and could see you retire earlier than you planned on hubbies income alone.

 

[WillG]

All opinions and help appreciated. Thanks Julles

Summary
* current ppor loan = $260k
* current ppor wouldn't attact much rent
* want to invest
* likely to have servicability problems
* good at renovating
* 1 income @ $50k

Immediate Options
* Convert your ppor to Interest Only loan while you think about what you can do.
This will help you to make sure the payments can be made. Park any extra funds into an offset account linked to the ppor loan
* Get yourself some kind of job so you can take advantage of your tax free threshold (you can earn up to about $11k tax free)
* Continue to learn about property investing and ways you can improve your situation
* Take in a border if you could tollerate one

Longer term options
* You should think about where you want to be in 5 & 10 years and work backwards.

 

[BayView]

Point 1. Think outside the box on the IP. There is no need to buy an IP that has a cashflow shortfall. This, of course, means you may need to buy outside your neighborhood where there are decent rent returns and cap growth.
You will also need to look at buying a CASHFLOW POSITIVE AFTER TAX property. Read all of Margaret Lomas's books on this strategy.
To help with cashflow you should look at restructuring your finances to obtain an interest only loan/s for your investing plans.

Point 2: Don't sell the riverfront home. You answered your own question there; there is no more rive-front land being made.

 

[skater]

Firstly, I would go & talk to some of the Agents in your area & get some reliable information on rental rates & likely vacancies. If you are in a waterfront home, it may get a good rental income. You could also change your P&I loan to IO & put any spare funds into an offset account, there are some great Mortgage Brokers on the forum who could organise this for you. This will make the mortgage & any expenses tax deductable, so should help with your situation. Next, look around for a cheaper place to rent for yourselves, maybe closer to his work so you can save on petrol costs. Your PPOR can be rented out for a period of up to 6 years & maintain it's CGT exemption. This could be all you need to see you through these hard times.

Since your kids are independant, think about putting your name down at recruitment agencies for temp work. I tried unsuccessfully to find a part-time job for some time before I did this. Working as a temp, I found was good. You will sometimes have long periods without work, then many weeks with full employment. If you do a good job you will soon be in demand. Some companies don't employ people until they have "trialed" them in this way too.

Best of luck.

 

[Julles]

Thank you all for the replys so far,

Steve .. The part time job, I've been applying but with no luck as yet, small town syndrome and my age maybe, but I will keep trying. I've dabbled in small trades in the share market with our cash but since it's crashed no part time income for us there. As we don't buy and hold for the divies.

WillG ... Yes I suppose we have been thinking that this place is actually our retirement money as the capital growth should be substantial ( we hope) 15 min's from rapidly growing city, 1 3/4 acre virtual Ocean front, national park between us and the water views. Proposed marina and a foreshore Eco park. Five to Ten years time ideally more secure financially.
A border is out of the question and youngest daughter is still living with us and we live out of town.


Our mortgage comes off a 3 year fixed on the 9th of Feb. So I gather we can put it at interest only to save some money there after the 9th.


LAussie I will look for and purchase Margaret Lomas's books as soon as possible. I did realise investing outside this area was probably the best idea as everything in the area is cash flow neg, just need to find one and have the cash to secure it.

Skater .. The rent closer to his work has crossed my mind often lately due to rising petrol costs so I will look into the costs of renting and what we may get for the place here. We are waterfront and it's a beautiful block I just figured no one would want to rent permanently this far out of town for a decent price. I will talk to some agents and see what they think. It could be a sort of solution for us until interests rates go back down.

Thanks for the info about the 6 years and no Capital gains tax.


Any other suggestions are most welcome

 

[luce.rocks]

If you're concerned about your ability to meet your current financial obligations, why are you looking to add to them?

Anyways, how big is your PPOR block? What's the zoning? Could you try to get finance to do a small development on your waterfront block?

 

[yo yo ma]

...just need to find one and have the cash to secure it.

I think this will be your most difficult task... the serviceability. As the others have suggested, talk to some agents on rent returns & an estimation of the value of your place. Also speak to your lender and/or a mortgage broker (there are some good ones on here) to see how much you can borrow. Then have a look around and see if you can find anything. Post the figures on here, to get some ideas. From what you have described, it doesn't sound like selling your waterfront place is the best idea.
Good luck with everything
Steve

 

[Julles]

Lucerocks .. we were pondering using the equity to invest in a high growth area for capital gain to go on and sell and then do it again. Goal is to own the waterfront.

I've checked out zoning a number of times, even argued with the council about their decision, however to no avail. It's low density and council has refused to change it even though land around us with houses on are sitting on under 700 sq metre. They rattle about no more subdivisions in septic areas are going to be allowed.

Yo yo ma ... I will do that, sounds like a good idea Thanks everyone and good luck with your investing. Julles

 

[alexlee]

Lucerocks .. we were pondering using the equity to invest in a high growth area for capital gain to go on and sell and then do it again. Goal is to own the waterfront.

Which is all well and good, but once you own that waterfront house, what are you going to live on? You would also need other investments to provide an income.
Alex

 

[MPmelb]

you already have serviceability issues and your fixed loan is ending, so you will incurr a worse i/r environment now.

I agree with some of the other suggestions.

Put in a boarder for cash.
Do whatever it takes to do a subdivision. If not possible, renovate your current home even further, building equity. Then wait for the stockmarket to bottom out and buy in a good prices on shares or managed funds.

 

[steveadl]

Which is all well and good, but once you own that waterfront house, what are you going to live on? You would also need other investments to provide an income.
Alex

Exactly. Julles, it's not going to be much fun living in the waterfront house if you have to scrimp on the pension or super allowance.

 

[ice]

If you are finding it hard to get a part time job, why don't you try temping?