WWSSUD? What Would Somersoft Users Do?

End goal: Buy a PPOR in Sydney's inner west. Minimum 2 bedrooms, doesn't have to be a house, but must be dog friendly (ground floor unit/villa/townhouse). Maintain our IPs to eventually have a comfortable rental income ($50k per year or so in today's values)

Current situation: In our early 30s. Combined income of $170k (pretax). No current PPOR but in a fortunate position not to be paying rent where we currently are. 3 x IPs.

Debts/Assets:
IP1: Value $400k - Loan $293k (73% LVR) - $330 rent per week
IP2: Value $430k - Loan $371k (86% LVR) - $425 rent per week
IP3: Value $355k - Loan $323k (91% LVR) - $380 rent per week

Personal debt: $50k (i know, i know...!! we're both paying off our mistakes of bad debt from our 20s). Half of this amount is forever on interest free balance transfer deals, the other half on a low rate fixed personal loan due to be paid off in 12 months from now.

We have approximately 60k accessible in equity from IP1 if we bring our LVR up to 89% (I'm aware we will have to pay LMI top up)..

So how do we get closer to our goal? 60k won't get us anything in Sydney... So do we continue to invest interstate and/or outside Sydney, turn to shares, do the sensible thing and pay down our non-deductible debt or bide our time until we have a decent amount of equity to access to purchase our desired PPOR...? I'm just afraid the longer we wait, the more we will be priced out...

Would greatly appreciate your thoughts..
 
On your level of income, I'd dig into the personal debt best I could. You should be able to get rid of all of it in 12 - 18 months if you make it your priority.

The above is especially true if you're not paying rent right now. That's a massive saving that can be going toward the above. How long will you have this lucky circumstance for?

If you're going to be in that circumstance for a while, then you may as well benefit from it. Pay down bad debt. Get some savings (/deposit) happening. Get some more growth on IPs.

Where abouts are the IPs?
 
I'd pay it down. It gets it off your books and will allow you to save faster - particularly given you are living rent free.

A question for the brokers - How would most lenders react to the $50k debt in the changed lending environment? ( if trying to extract equity to buy get a loan for another IP )
 
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If you can live on 50k, and you earn 170k, why haven't you paid off the personal debt?

Oh we can't.. Well, don't want to would probably be more accurate. The 50k income we want to produce would simply be to allow the other half to drop down to part time hours by the time we hit 50 (20 years away). So not too much of an unrealistic goal I don't think

DT, I know normally bad debt should go first, but seeing as though 1/2 is on long term interest free periods, and the other half low rates, I thought the opportunity cost of not investing that money would outweigh the positives (increased serviceability, only having tax deductible debt etc). Am I wrong?
 
I'd pay it down. It gets it off your books and will allow you to save faster - particularly given you are living rent free.

25k @ 0% interest until Jan 2017 (balance transfer offer - whatever I have owing of not paid off to be transferred to a similar offer)

25k @ 7.7% (fixed secured car loan)

So not high rates as far as personal debt goes.. Hence why it's not an obvious choice to just pay down this debt first...
 
25k @ 0% interest until Jan 2017 (balance transfer offer - whatever I have owing of not paid off to be transferred to a similar offer)

25k @ 7.7% (fixed secured car loan)

So not high rates as far as personal debt goes.. Hence why it's not an obvious choice to just pay down this debt first...

Just get rid of it. Lol. You are also making an assumption that similar transfer offers will be available in 2017. Lending environments and regulations change.

Health and employment status can also change unexpectedly.
 
End goal: Buy a PPOR in Sydney's inner west. Minimum 2 bedrooms, doesn't have to be a house, but must be dog friendly (ground floor unit/villa/townhouse). Maintain our IPs to eventually have a comfortable rental income ($50k per year or so in today's values)

So how do we get closer to our goal? 60k won't get us anything in Sydney... So do we continue to invest interstate and/or outside Sydney, turn to shares, do the sensible thing and pay down our non-deductible debt or bide our time until we have a decent amount of equity to access to purchase our desired PPOR...? I'm just afraid the longer we wait, the more we will be priced out...

Would greatly appreciate your thoughts..

No one has a crystal ball, but I do not understand the END GOAL, buying something in Sydney's inner west for how much?
With your high LVR, bad debt (doesn't matter what it costs currently 7.7% is non-deductible debt so after tax money!), and feeling you are price out are not valid reasons to invest.
What is your priority, having a PPOR which you want to settle in OR investing into IPs? Why are you investing then, what are you trying to achieve?
I would pay of bad debt, then set up a plan for increasing your deposit for your PPOR, if that's your priority. What is the rush, you are young, you have time, and following the herd mentality may get you into trouble?
Remember what Warren Buffett says, "Be Fearful When Others Are Greedy and Greedy When Others Are Fearful".....:eek:
 
I would take a serious look at your living costs. An income of $170k with NO RENT, is a serious amount of income. I can't even imagine how to spend that much on day to day costs.

Do a serious budget, and scale back so that you are living on one income only, and divert the funds into paying out the $25k that is on 7.7%. Once you have knocked that on it's head, I'd look at paying off the other $25k. Then keep putting the money aside into an offset on one of the IP's.

I wouldn't look at further investment until your LVR is in a much better position than it is now.
 
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