Your expert advice on my situation and what should be my next move

[MohanWei]

Hello all,

I need your expert advice on my situation and what should be my next move.

1. Primary residence:
a. Loan outstanding: $190,000
b. Worth about: $350,000 (Westpac valuation last year)
c. $330,000 valuation by NAB
2. IP #1
a. Loan outstanding: $260,000
b. Worth about: $250,000 (Westpac valuation last year)
c. $240,000 valuation by NAB
d. Rent: $230 per week

Myself on $80K base full time and wife is on $25K PA part time. We do not have any other loans. We are in late 30s with one child aged 6 years. Last year we bought an apartment overseas from equity from my primary residence.

What I want to achieve in next 10 years: I would like achieve $5,000 per month passive income through rent.

I am thinking of getting NRAS property for my next IP. Any positive cash from this property, I would like to put it in my primary house, so that I can pay off this loan within next 4 years. Is it a good idea?

Based on the above, what should be my strategy? Please can you give me guidelines on how to achieve what I want to achieve? Any feedback is appreciated. Thanks in advance.

 

[BayView]

Assume that approx 20% of your rent is eaten up by holding costs (other than loans). This factors in a couple of weeks vacancy, rates, insurance, maintenance, etc. It could be less, but plan for worst; hope for best.

Based on above, to achieve $5k passive income from rent, you would need to be receiving approx $6k per month and have no loan at all on the property.

But, you will pay tax on the $6k, less the expenses in your tax return assessment..

You may need to expect that about 1/3 of the rent is taxed after all expenses have been factored in to the tax return, so you really need maybe at least $7k or so to be truly passive at $5k.

I don't think this will happen in the next 10 years, unless Uncle Tatts helps out.

You will need to buy only positive cashflow investments from now on to have any hope - unless you can find a large chunk of cash to fund the purchases..

Using your available equity in your PPoR is still a borrowing, so you would need to find IP's with at least 10% return to get the pos cashflow levels you need to get even close to the $5k, and you would need to get maybe half a dozen of these or more under your belt to do it..

Sorry to be the bearer of bad news. Not saying it can't be done, but it is a lot of passive income.

It is always a good strategy to pour as much available income into any non-deductible debt (PPoR loan), and then continue with reduction of any other debt - no matter what the tax implications are.

 

[willair]

What I want to achieve in next 10 years: I would like achieve $5,000 per month passive income through rent.
.

That's only $1250.00 per week,then once you take all the up-front costs,insurance,rates ,land tax,repairs,travel that's going to eat into the 1250 in a big way,but i'm no expert but 5 k does not go a long way these days..

 

[MohanWei]

Thanks all for feedback on this so far.

To make it myself more clear, I want to achieve $5K per month after all costs and no loans on IPs or primary residence.

Also I would like to share what I have achieved this far. I came to this country 8.5 years back with $1,000 cash. We built our first home around 4 years back and I spent $300K on it. I also withdrawn around $40K from this loan for purchasing overseas apartment. And today outstanding loan on this is $190K

I have not won any Totts, every years we have been going on overseas holidays since last 3 years and short holidays ever since I am here in this country.

To my understanding, it is possible to achieve difficult task with careful and good strategy.

 

[Rolf Latham]

To my understanding, it is possible to achieve difficult task with careful and good strategy.

YES !


ta
rolf

 

[HD_ACE]

To my understanding, it is possible to achieve difficult task with careful and good strategy.

Good work for understanding you need a strategy.
Now Define the strategy and stick to it.

Cheers

 

[DaveM]

How did IP#1 end up below 5% gross return and in negative equity?

 

[Shahin_Afarin]

are the existing properties houses or units?

 

[MohanWei]

Thanks.

Both properties are houses.

When I purchased IP #1 I did use equity on my primary home.

IP #1 Purchase price was $248K but I borrowed loan that include purchase cost as well.

 

[Shahin_Afarin]

Can you not develop the current properties or create dual income occupancies? Have you considered this as an option?

 

[MohanWei]

I did try to convert but am not getting approval on subdivide.