Whats the smartest thing to do ?

[Bez]

Hey guys, Im very new to property investing and im looking for a little guidance.
I am unsure what I should do with my current IP.
It is a 2bedroom Unit located in Taree, purchase price $125,000 returning $155 a week rent, will be raised to $160 in a few months..

I currently owe $110,000 on this property, and have been paying Principal & Interest repayments.

I can think of 3 options in my head which are :-
1) I can change to IO now and start saving for the next IP, but also have to pay money to cover the loan repayments.
2) I can pay off another $10,000 from the loan and switch to IO which would make the property nutral to positive cashflow, then save for the next IP.
3) I can sell the property and find something better.

I have considered IO with an 100% offset account but my loan is just under the minimum size required for the offset account loan..

My goal is to create some extra cashflow.
What would the smartest thing be for me to do ?

Thanks..

 

[steveadl]

If you're looking to create extra cashflow, option 2 sounds like a good idea. It becomes cash flow neutral (and soon after positive) so free's up your extra cash to put towards the next IP. Don't forget, the $10k you put into it to make it neutral is not lost, it can be accessed through equity to fund the next IP deposit - it doesn't need to be kept as cash.

I'm not in favour of selling if it can be helped.

 

[alexlee]

You can't be far off neutral cashflow now. You're probably losing maybe $1k a year, if that?
Alex

 

[Modal Harmony]

Agree with Steve; hang on to it if possible for medium / long term to get CG for later years.

I would think a switch to IO would be advantageous. Do you have a mortgage broker to discuss with?

 

[HandyAndy888]

Do both, switch to IO and add in 10K, and yes, access this equity when the next opportunity arises...