Investment Crossroad... next step?

[Orchard Grove]

Hi Everyone,

Thanks for providing a great forum, definitely a wealth of knowledge! Thought I might try and tap into it.

Right now I feel I am at an investing crossroad (I am 32) and the next step I take will be important (which may explain my current paralysis), my wife and I are both working and on decent salaries, however she may stop working soon if things go according to plan (babies!!). So I want to make the most of our current position. Been to the bank and can purchase something to the value of $520k, however my wife is worried about servicing etc. if she stops working for a year or so...

We recently sold a flat that cost $120k, for $175k. Was in a big group (80), high strata fees and furnished so was more of a headache and my intention (sold in April 09) was to upgrade to another IP that would be a better investment.

Our current holdings:
IP1 - Value $380k, loan $190k
IP2 - Value $475k, loan $350k
PPOR - Value $420k, loan $175k
LOC - $80k (for deposit on IP2), 20k available.

So in summary, position is Real Estate - $1.275m, Cash - $70k, Loans ($785k) - Net Equity of $560k

Also intention of IP2 is to eventually build PPOR (5-7 years) as current PPOR is a townhouse.

Questions going through my head:

What is my next move?
Is it a lot harder to service loans etc. once kids come along?
Other people's experiences with one year loss of salary and the effect on their investment plans?
Should I stop procrastinating and just keep going!!

Thanks
OG

 

[josko]

Welcome OG,

I understand your predicament. The road you travel depends on your risk profile.

The fact that your wife will be losing her income will affect your serviceability with the banks. If you want another IP, the time to buy is now or at least before she has a baby.

Is your portfolio negatively geared, PG or neutral?

Have you crunched the numbers to understand how much you will be living on when you lose her income?

Your LVR's are great and it seems you have alot of equity to back you up.

It is hard to give you an opinion without knowing the real numbers...salaries etc and I don't expect you to post it for public viewing!


Regards JO

 

[Aaron Sice]

get some cash under your belt to "insure" your wife's income.

get a commercial property CF+ or a few resi IPs CF+ to improve your cashflow, or maintain at least 75% of it when a bub comes along.

sigh - i wish i had LVRs like that. i should have....but don't....

 

[Orchard Grove]

Thanks for your replies.

JO... we don't mind taking risks when it comes to property and our portfolio is currently negatively geared, IP2 was purchased in 07 and rates fixed at 7.67% (DOH!). IP1 is going along nicely and close to neutral.

Salaries are both under 100k... so jointly it has allowed us to go negatively geared, if we take one away though, we may have to eat into some savings but then if we cut back on lifestyle for a year or two I think we could cope.

LVR's are good and there is definitely equity there to do something, I guess cashflow worries me. Perhaps I am being conservative, Adelaide has done well recently... Investing in Sydney interests me.

Blue Card...

My plan was to have wife's after tax salary in cash as buffer, which we are close to having, if we bought something else we would probably have to use this cash to maintain all properties though.

CF+ commercial would be great, don't think I could afford it though.

 

[The_Bludger]

Hi Orchard,

Ever heard of capitlising interest? This may work for you.

Check out this thread and then do a google on it.

http://www.somersoft.com/forums/showthread.php?p=581469#post581469

Doesn't work for everyone, but if you're worried about cash flow and your wife's intention is to go back to work at some point, it will probably suit you well.