What would you do?

Firstly - Congratulations on a terrific site. I have been reading through various posts for a week now and given the experience of the users in this forum, I am keen to learn your thoughts on what I should do next (if anything) given my current position.

I own my own house in the SE of Melbourne (say $320K) and have a small amount of equity in an IP in Bentleigh (value is say $510K with loan of $430K) which I have had for nearly 4 years. I feel the IP is really only showing good signs of CG during the past 18 months.

Currently, I can not afford to pay anything more given the difference between the rent earned and the interest payable which I feel is my only barrier. Whilst I would like to purchase another property, I am not really in a position to incur the additional costs associated with another property.

From the little I know about investing, I see my options as either waiting for the rent to increase to help with the interest shortfall before purchasing another property, or trying to find a cashflow positive property with less CG as this would not put any strain on me. I should add that I am able to financially withstand a short period without tenants but it is the ongoing strain which I want to avoid.

Your thoughts? And thanks in advance.
 
You forgot option 3

Purchase another property using equity one PPOR and IP leaving enough equity left over to pay interest only repayments on new IP property for a couple of years. Not saying this is what i would do but you could consider it
 
cash flow neutral or +ve properties anytime.. There are a few regional places out there that have good C.G potential while keeping your holding cost low, or even help you in reliefing the strain of negative gearing.
 
cash flow neutral or +ve properties anytime.. There are a few regional places out there that have good C.G potential while keeping your holding cost low, or even help you in reliefing the strain of negative gearing.

Thanks for that. In my early stages of investment, this strategy sounds more appealing than the concept I have read on here about (debt funding debt) as I am somewhat pretty conservative.

Are there any areas anyone can suggest for a regional IPs so I can do some research?
 
Yep;
done the neg cashflow while waiting for the cap growth thing; no fun at all. You become a slave to the IP's.

Besides, I found out that you can have your cake and eat it;
cashflow, depreciation, tax benefits and cap growth.

You just need to look a bit further afield and a bit harder.
 
Yes I agree although finding a property which fits this description is my next challenge. From initial research, I don't think it will be easy.

Cheers and thanks for your feedback.
 
Currently, I can not afford to pay anything more given the difference between the rent earned and the interest payable which I feel is my only barrier. Whilst I would like to purchase another property, I am not really in a position to incur the additional costs associated with another property.

Are you saying you just can't afford to save anything from your job?
Alex
 
Thanks for that. In my early stages of investment, this strategy sounds more appealing than the concept I have read on here about (debt funding debt) as I am somewhat pretty conservative.

Are there any areas anyone can suggest for a regional IPs so I can do some research?

Gippsland, Horsham, Ballarat, Bendigo and surrounding suburbs.... Victoria has so many opportunities.
Personally I'm aiming for quantity in regional Vic. I aim to own at least 10 reasonably cheap (<200k) properties with very good rental yields. For me thats preferable than having just two or three more expensive but highly NG properties. Yes CG will be slower (never know though) but not having to supplement the mortgage much is more important to me as Im happy to wait long term for CG and have the tenants pay my mortgage for me ;)

Looking further out you'll find some bargains and from what I've seen, the majority aren't CF+ but they come pretty darn close.
 
Yes I would say that there is no money left from my pay after I pay the shortfall in interest. Although I get a few $Ks back at tax time which help me keep a nice balance for some spending money.

And yes I do have a depreciation schedule and that is factored into my tax return each year.

Thanks again for the replies and so far, a regional property which breaks even or managed funds sound like the better options for me so I'll keep researching.
 
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