Which house would you keep

[NikkiB]

Hi, I live overseas, coming back to Brisbane to live, have to buy my own house to live in... To be able to afford this 2 of my investment properties have to be sold Would anyone have any advice as to which prop I should keep or any advice in general, somehow I managed to accumulate 3 houses, not with a lot of sense or thought, just kind of happened, I am not very sassy when it comes to this kind of thing and find it hard to seperate my heart from my head.... I cant seem to see a way to keep all 3 and still manage to afford to buy a house of approx 700,000 with an income (from Ireland and before husband gets a job) of Aus$ 45,000 per year.
Here are the 3, what would you do, I think the res B or large corner block woud be worth keeping one of them, but which one??????

(1) Bald Hills, 2 bed, 1 bathroom, fibro, asbestos roof! very small house
1950's? 506sqm, no side access, nice street, walk to shops and train, cutesy cottage look, fully fenced, can bring in car to yard but no lug or carport.
approx value $300,000
Mortgage $65,000
Repayment $120 pw
Rent $230pw


(2)Petrie, 3 bed, 1 bath, galvanised roof, strong neat house, Next door to Petrie railway station Residential B (possible unit development) 847sqm
fully fenced, (Nicest of the 3)
approx value $320,000 -330,000
mortgage $106,000
Repayment $190pw
Rent $235pw

(3) Strathpine, 2 bed 1 bath, tiled roof, on large corner block, 799sqm house to one side of block, (could be subdivision one day????)
approx value $300,000
mortgage $180,000
Repayment $293pw
Rent $210pw (soon to go up to $225)

Throw it at me

 

[parkd]

Ok there are a couple of things that you could do IMHO.

First of all have you looked into getting a PAYG tax variation which will give you extra cash flow through out the year (instead of bulk tax refund at tax time). This will give you that extra income to be able to afford the payments for your PPOR. This may mean (not saying it will but) you might be able to keep all three properties. Speak with an accountant about this so that you can correctly work this out to your advantage.

However if you had to sell, the deciding factor will what you can afford in regards to repayments. IMHO if it was me I would look at selling property number 1. Given it's age etc. This would give you a handy deposit on your PPOR giving you a little bit of leeway on this loan ($235,000 less CGT etc.).

With property number 3 maybe look at refinancing so that your repayments are less ie. neutral gear this property. This would free up cash flow as your repayments will be neutral with rent. You will have to cover charges but again this could be offset with tax variation (tax deductible).

With property number 2 being positivley geared this would add to your total taxable income. This would need to be taken into account when dealing with the tax variation, but no major affect given it is not a lot of money per year (about $2500 per year). Add this to your salary of roughly $45,000 you would have a total income of about $47,500 roughly.

That's what I would do if it was me. But also I would speak with an accountant to get an educated opinion from a tax point of view, particularly with the tax variation.

Cheers,

D

P.S. - Just add also (given my background) that this is general advice and does not take into account your personal situation and you should seek advice from a professional advisor.

 

[WBG Redcliffe]

How cheap are the rents.... The first thing I would do is do my maths on the correct rents. Then if I still had to sell I would keep the block that can be developed. It would have the most potential for Capital growth in the comming years.

I'm sure there would be a way of keeping the lot.

 

[silversands]

Hi, just a couple of other questions that may help some to answer your question. Will you have any additional cash to throw at your deposit on the ppor you wish to buy? Either from savings or sale of your or your husbands assets?
Also, what makes you think your husband cannot get paid work in Aus, is it some kid of visa issue? Even if he picks up a small income, thiscould help immensely.

Also how recently were these properties valued? You may be surprised at recent valuations. This may sound like a given but you do have your i.p's mortgages on interest only don't you?
From quick calculation you have almost $930K worth of i.p 's and near $580k equity, thats pretty healthy!

Do you have a particular house in mind that costs $700K, or could you consider one that you could pay a $100k or so less for and do it up a little to increase it's value also.
It would be a shame for you to sell any of thes properties if you really didn't want to.

Speak to one od the mortgage brokers on this forum as I think they could help you to find a way to hold your properties if that is indeed what you really wish to do.

All the best with your decision!

Regards Jodie

 

[silversands]

p.s those rents do sound a little low...

 

[Perp]

I would be looking very, very hard for a way to keep all properties, and I agree with others that a good mortgage broker should be able to achieve that for you. Will hubby be able to work after a short while? If so, you have a high enough equity buffer that at least some lender should still look at you.

And if you haven't figured it out yet, do NOT pay down investment loans like you seem to have (or perhaps you've held the properties a long time, in which case excuse me for the incorrect inference!) - pay interest only and if you have extra cash put it in an offset. Otherwise you get into your currrent undesirable situation of having low tax-deductible debt on your investment properties, whilst having to take out a relatively large non-deductible debt to buy your own home.

 

[Aimjoy]

Throw it at me

Well you asked for it - so here goes:
NikkiB you are nuts on 3 counts:
1. Your rents are way too cheap - get 'em fixed to market rates asap
2. You have heaps of equity in your IPs - no need to ever sell IMHO - keep them or be locked out of their CG forever.
3. $700K is way to much to be splurging on your good self at this stage for a PPOR

You have less than $600K of equity totally (and I am for the purpose of this exercise assuming you have no other cash / shares etc)....and you want to tie up $700K on yourself (in a PPOR). Thats nuts (from an investment perspective) AND you are only on $45K a year. Sure you can do it but you are doing it at a cost of your future.

IMHO you should be seeking to live as cheaply as possible and put that $600K equity to work making more money!

Just my 2c.
Aimjoy

 

[Dazz]

have to buy my own house to live in...

If you replace that word with "would like" the rest of your post becomes irrelevant.

Go rent a nice place, pay bugger all for it p.w., keep all three houses and let some poor Qld landlord pick up all your rates and maintenance issues. It's like having a free sugar daddy and handy man all rolled into one.

 

[steveadl]

Keep all 3. The first 2 are putting money into your pocket every week (and have potential to put even more in judging by others comments on your rents), and the last one is a development block which as a bonus lets you leave the old house standing and build on the back half. Plus, it's only slightly negatively geared anyway.

If you have enough equity - why not just get the PPOR using that? Or as others said, rent, or opt for a smaller PPOR to start with.

 

[BoatBoy]

What Daz said and keep them all.

Dave

 

[NikkiB]

Thankyou to all who have made responses, To give a bit more info...
I am coming to Aus with kids 1st July, husband is staying in Ireland to continue working up till October, otherwise we both land out there with no income, after he arrives, we do have $45,000 pa income from Ireland.
He is to have an operation on his arm just before coming over to us, so he will be out of work for 6 months.
Sorry to make it so personal but he is really against going to Aus, so marriage is only just hanging in there and I dont want to make things financially tight on us or he will be on the next plane back if it gets all too hard.

To answer a few questions that were asked..... There is no extra cash flow, what bit there is will go towards flights to get there and shipping of our personal affects and a bit in my pocket.

Like I had said above, Will have income from July-Oct but after that no income as he wont be working, just $45,000 that our farm makes as a passive income.

Rents are cheap, I think our managing agents recently put them up to keep us happy but did not really meet the current prices, It maybe worth our while to look into this with them.
Any thoughts on what rents are going to do in the near future?

They also just gave me those 3 valuation this week!

No we dont have our loans Interest only, but are now considering it, we are very nieve and dont have a clue what we are doing.

I left Aus in year 2000, before that was working for Energex. We bought houses in 2001 and 2004 and I have never made a tax return or done anything tax wise since the day I bought them

SO yeah I really need help, I dont even know how a mortgage broker could help me, so is there any mortgage brokers and i suppose accountants that anyone could recommend in Brisbane?

I could come down in price with my PPOR a bit, I am just trying to keep all happy with buying a couple of acres, since they are all used to space from a farm,
SO there is the embarrassing truth of my messed up situation which I have managed badly if not till now just ignored...
Thanks for all your help and please keep on with the comments, I am learning so much

 

[BoatBoy]

What are rents doing, have a look at this thread

Brisbane rents tipped to skyrocket 50% (over 4 years)

http://www.somersoft.com/forums/showthread.php?t=40911



Again, like has been suggested before, you will rent a much nicer place for much less compared to buying, that would be my choice until you and your husband get on your feet.

There are some good Mortgage brokers on the forum that I am sure would be happy to give some advice.

Dave

 

[Mr. Fabulous]

SO yeah I really need help, I dont even know how a mortgage broker could help me, so is there any mortgage brokers and i suppose accountants that anyone could recommend in Brisbane?

Mortgage Broker - Jo @ Intellichoice. She is beyond fantastic. Her email is [email protected].
Accountant - Martin Ryland (posts on here as Mry). Also fantastic. His email is [email protected].

They both understand property investing and will definitely be able to help you.

Mark

 

[silversands]

You poor darling, no wonder you are stressed! I think the very first thing you need to do when you get back is get in touch with a decent property savy accountant.
Yes, I dare say you'll have a bit of work to do to sort out your tax liabilities, no returns since you left? Ouch!
All is not lost though, a good accountant will get you back on track.
For a broker, I and many others would reccomend Rolf Latham, based on the Gold Coast but you'll find he is a very active poster on this forum.
I'm certainly no genious with Centrelink details but I am presuming you will be elligible for basic entitlements for your children at the very least. Contact them immediately to find out where you stand with them.
I'm sorry I know so little about Brisbane but as I and others pointed out early, those rents sound very poor. Your property manager should work harder
Are your family ties in Brisbane?- or could you consider a small property for under $500K in Adelaide's nth or sth if you want more "space" around you.
When all is said and done, no amount of money can replace the value of a happy family, so please don't jeopardise an already strained marriage if it is worth fighting for! I think you may be surprised though at what you might be able to acchieve with a little investment knowhow! Chin up!
Kind regards Jodie

 

[natmarie73]

I second what Daz said - you don't need to buy a $700,000 house when you can rent one for the short term much more cheaply until you get your finances and rents etc sorted out. You do not need to sell any of your properties.

You can still buy decent houses not too far from the city for $500,000 or less.

 

[Seaview]

Hi
I agree with Dazzling,
...and perhaps you may consider the following

# it is often wise to rent in an area before you buy - it is a stress free way to see if your family fits in the neighbourhood, schools etc. It is much harder to relocate once you are locked into a new PPOR. You are also in a better position to pick up a local bargain once you know the area well.

# if you sell your IPs you will be up for quite a bit of capital gains tax I assume, plus cost of sale etc. which will reduce the amount of cash available to buy a new PPOR

# Even if you sold all 3 IPs you would probably still need a mortgage to fund part of the PPOR purchase

# But it may be hard to get another loan initially, with no assets in OZ (assuming you sold all IPs) and no income in OZ if hubby is not working. Will our lenders count Irish farming income?

# Even if you could get a loan, having to pay another mortgage (with little income to support it) could put more stress on your family as it adjusts to a new environment.

If I were you I would take advantage of our great country and rent a lovely house on a few acres for a year. Your rent would be paid for by IP rent increases, switching your loans to interest only and claiming some "pay as you go" tax deductions, also from the generous family benefits you would receive from Centrelink. (Try DEPRO in QLD for great tax depreciation schedules to maximise deductions- this is important if you are facing a few years of back taxes from ATO)

Also, you could eventually tap into all that equity and borrow against it to buy income producing investments (eg. cashflow positive property or shares/ managed funds eg. Navrainvest.com.au) that could service the debt on a PPOR. My preference for a PPOR is to be creative: buy a development size block in an area you like, and add value eg. subdivide then sell off half which would help pay for remaining lot. Also, in rural areas you can build luxury houses quickly at half price by having Retreat or American Barn style shed-houses built and fitted out lavishly but cheaply via auctions etc. You can even clad them in stone or cedar if you want to look very classy.

You may also want to consider the future generations The key to building wealth is to aquire valuable assets, and your IPs have already laid a solid foundation for your family's future prosperity, and for your kids to own their own homes one day. It would be a crying shame to sell them and even worse, pay lots of tax to the government and commission to real estate agents.

However, it is your life, and you know what's best. Even if you have to sell one or two IPs, please at least keep one, probably the development block, for future growth. And please see a good accountant and loan broker too.

Cheers
Seaview
PS We were in Ireland last Christmas and it is lovely. It was one of our favorite places in Europe, as well as Venice and Switzerland.

 

[Mry]

You need to improve your rents. Speak to your agents.

You need to lodge your tax returns ASAP. Penalties and interest are accruing.

There are two issues which make your situation very difficult. One - you want to buy a $600,000+ house. Two - both of you will not be working. This makes your situation difficult because you will be cashing in ALL your investments to rely on one source of income (the farm) and that will be it for the rest of your lives should you choose not to work. I would not feel comfortable in this situation.

As the other posters have mentioned, I would seriously consider what you are doing investment wise. It may be that there are factors that prohibit you from considering alternatives but at least you can think about it for now.

 

[silversands]

Hi Seaview,
- great first post. Look foreward to more words of wisdom!
So Nicki B, where are your thoughts about all this now? Has any of the above given you any sense of direction?

Regards Jodie

 

[tubs]

If you DO have to sell one, IMHO, dont sell Petrie. I seem to remember that as being identified as a good growth suburb, its on a big block with devt. potential and in an awesome position if its next to the railway station.

The CG prospects sound pretty good for this one.

 

[NikkiB]

Hi Seaview,
So Nicki B, where are your thoughts about all this now? Has any of the above given you any sense of direction?

Thankyou to everyone who made suggestions and commented on this post.
Yes, definately got me thinking and I am going to try to retain all 3 properties

I will consider renting a house or buying a cheap house to live in.
From talking, there seems to be uncertainty with what is likely to happen with house prices, so am tempted to rent and sit on the fence until we see what is going to happen with market, my husband gets a job ect

It seems I am have my loans set up all wrong from an investment view
We are with NAB 2 loans are fixed and 1 variable, they are not Interest only
Is it worth considering refinancing with NAB or another bank (any recommendations?) to make savings??? would you fix all 3 prop, go interest only and spread over longest time ect ect? Can you add redraw and offset to an interest only loan?

Of we go down the route of renting a house and rent covered by Irish income, would you consider it a good idea to purchase another invest prop with our current protfolio and level of assets/indebtiness/income