Not sure who or where to go to...

Hello Community.

Been reading the forum for quite some time, and absorbing as much information as I can. I have read many of the posters talk about "their investment strategy/plan". This is what I don't know where to go to or who to talk to in order to develop this.

A brief idea of my situation:
I am 42, with a young family. Have spent a very long time paying off bad debt accumulated in my younger years. Currently, have a PPOR with a mortgage and 140K equity. The bank tells me I can borrow upto 400K or so with my circumstances in totality. I still have a small amount of "bad" debt that is going to take me forever and a day to pay off with my current income.

Due to my circumstances, whatever I do, it seems I can only do once. ie buying interstate, regional, local etc. I need to get the first one write, and to figure out how to maximise the growth. BTW, I live in Melbourne.

Do find this out, I have no idea where or who to go to.

Would really appreciate any input and suggestions from the community here.

Regards,
K.

 

welcome to PC @kermut, a few Qs come in mind:

1. how big is your current "bad" debt, how much does it affect your borrowing?

2. "the bank" might not be the best place to find a plan for your circumstance, a broker on this forum could do a lot more than finding your a loan

3.what are looking at achieving by purchasing investment properties?

 

Hi Eric.

Thank you for your reply.
In answer to your questions:
- the debt is about 38K. I understand it can be re-financed within my existing home loan, but it is not something I want to do. Once this is paid off, it frees up around $440 per mth of cashflow.

- I might not have expressed myself clearly. With the bank, I was only looking at seeing how much I could borrow. This would determine where and what price bracket I whould be looking.

- At the age of 42, my timeframes are reduced. My current job is pretty much secure for the next 5-8 years. Can't change jobs at the moment. My aim was to try to have a plan, whereby I could pay off the above debt within a year or so, and then invest with the idea of paying down my mortgage as much as possible over the next 8 years. That way, even if I have to take up a job at a lower pay grade then now in 8 years, my debt burden is less.

The options I had come up with were:
- buy land, build a house and sell (have a friend who is a builder)
- buy a house that needs some cosmetic work, maybe a kitchen mod etc, do that up and sell as a first project, pay off the above debt,
- buy a house with large land component, subdivide/get development approval, sell without building and take any capital gains to pay
- speak to some buyers agents interstate or regional to source relatively higher yielding properties. But there are so many, no idea where to begin
- I have been reading with keen interest posts by euro73.

The options are heaps, but which direction to go and who to talk to about it where I am stuck. As my equity only allows me to buy one property at the moment, I need to make sure I use the right strategy to achieve my end goal.

Regards,
K.

 

Hi @kermut

You mentioned you don't want to refinance your bad debt into your existing home loan. I'm interested in understanding the reason why, because I would imagine your home loan would have a much lower interest rate than you are presently paying against your bad debt loan. If so you'd be paying less interest if you refinanced and accordingly be able to pay the debt down faster.

 

Provided you increase your repayment by the same amount that you're currently paying on the bad debt (and keep it up).

 

Correct @Scott No Mates

 

I see.

I think your strategy is overall active strategy, could work well if plan and execute well.

the $440 per month repayment from the "bad" debt could have some impact on your borrowing (around $80k). it depends when you want to start, it might be a good idea to clear the "bad" debt if it has a negative impact on your borrowing.

 

Hi Jacqui.
I use the free interest rate balance transfers for paying this debt off. Have 2 and transfer between them when one term runs out. I make sure my payments are slightly more than what the interest would be. Essentially my payments are the same, but no interest. Never miss a payment on them.

Regards,
K.

 

Hi Eric.

Ideally, would love to start straightaway. If I waited till I paid down the 38K, it would take nearly 8 years.

While I have the ability to finance a purchase upto a certain value, I don't necessarily have the current excess cashflow to hold the property long term to let natural capital appreciation play its role. My main aim is to pay down the debt first, and then look at something that is very close to cash flow neutral (possibly after some work being done to the property) etc. This way, even if I have to change jobs after 6 years, I don't have to worry too much about how to make up any cashflow shortfall.

Regards,
K.

 

it might be beneficial to have a chat with one of the brokers on the forum re finance.

 

I agree with
@The Y-man .. it looks way too risky. I don't really see how you could 'afford' another $400k loan, if you can only put $440/mth towards such a tiny debt.

Your $140k equity.. is it based on 80% value?
(House value X 80% - loan value)

 

Talk directly with @euro73. You’re already keenly following his posts.

 

I do pay more to that debt. The $440 is what is the bare minimum to make the interest free balance transfer work in my favour.

Yes, the 140K is based on 80% valuation.

Regards,
K.