Author Topic: Some advice from Mustachian's sorely needed here!  (Read 3757 times)

JetD

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Some advice from Mustachian's sorely needed here!
« on: July 30, 2014, 04:34:08 AM »
Hi,  I've been following MMM for a while but decided to ask for some help because I'm not sure what to do.  I am 45, single have 75,000 in super, a $220 mortgage on a house that's worth about 750,000 and thinking about building an investment property in a beachside suburb for $335,000.  The problem is I only work part time with an income of about 42,000 (after tax) because I study.  A good aspect is that my house is big with 5 rooms and two bathrooms and two lounge areas and I live in Fremantle which is a hot spot and I rent out these rooms when I need to for about 170 a week each.

Should I just pay my mortgage off as quickly as possible or buy this investment property (which is 500 metres from the beach and should get about $350 a week rent)?   Any advice would be greatly appreciated.  Thank you!!

Cwadda

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Re: Some advice from Mustachian's sorely needed here!
« Reply #1 on: July 30, 2014, 04:48:51 AM »
I think more details about your finances are needed before answering this question. Retirements, savings, etc.

JetD

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Re: Some advice from Mustachian's sorely needed here!
« Reply #2 on: July 30, 2014, 04:59:02 AM »
Okay, sorry. I'm new at this so not sure what I'm doing!

I have no savings.
75,000 in super (retirement fund)
530,000 equity in my home
I own my car
Income 42,000 after tax

My mortgage is at $220,000 at 5% about %592 a fortnight.

If I go ahead with the new build my loans will add up to $570,000, repayments at about $700.00 a week, but I will get about $300 - 350 a week rent for the new house.

Am I missing anything?

Thanks!

Cwadda

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Re: Some advice from Mustachian's sorely needed here!
« Reply #3 on: July 30, 2014, 05:29:14 AM »
I'm not sure on this one. I'll let other people answer. But it looks like on paper it would be too risky of a move. You have no savings, so I'm assuming you have little or no emergency fund. Your retirement account could be at a more comfortable level IMO and with $42k/yr with all the mortgage payments and such you want to make sure you're comfortable.

What is your living situation? Do you have a family?

JetD

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Re: Some advice from Mustachian's sorely needed here!
« Reply #4 on: July 30, 2014, 05:40:29 AM »
I have a grown up daughter who lives away from home, so no dependants. My house is large and I have a regular boarder who has been here 5 years who pays me $160 a week and I've just started with another room on airbnb that I have at $80 a night or $250 a week.  It's only been on a couple of week and I've had 3 stays already! I can also get another boarder in for $170 a week.  I suppose what I'm relying on is negative gearing of the second property and the rise of the equity in it as time goes on. 

Cwadda

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Re: Some advice from Mustachian's sorely needed here!
« Reply #5 on: July 30, 2014, 06:08:18 AM »
I have a grown up daughter who lives away from home, so no dependents. My house is large and I have a regular boarder who has been here 5 years who pays me $160 a week and I've just started with another room on airbnb that I have at $80 a night or $250 a week.  It's only been on a couple of week and I've had 3 stays already! I can also get another boarder in for $170 a week.  I suppose what I'm relying on is negative gearing of the second property and the rise of the equity in it as time goes on.

Would you consider downsizing and then fully renting out or selling the $750k house? I'm interpreting that you have a come-and-go type rent situation where people stay sporadically and you collect sporadically. I personally would feel better with a lease situation where you are consistently collecting X dollars. And I think X would be a nice number. That's a big house for someone living alone.

JetD

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Re: Some advice from Mustachian's sorely needed here!
« Reply #6 on: July 31, 2014, 03:08:33 AM »
I have thought about downsizing but I love the area I live in and love my house.  It probably is risky to build this investment property but I figure I am 45 and don't have as many "loan years" left in me as younger people.

Cwadda

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Re: Some advice from Mustachian's sorely needed here!
« Reply #7 on: July 31, 2014, 05:10:09 AM »
Bumping this for other more experienced folks because real estate stuff is not my forte.

JetD

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Re: Some advice from Mustachian's sorely needed here!
« Reply #8 on: July 31, 2014, 05:53:18 AM »
Thanks Cwadda!  Hopefully someone can steer me in the right direction, the forms are almost ready to be signed....

marty998

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Re: Some advice from Mustachian's sorely needed here!
« Reply #9 on: July 31, 2014, 06:30:07 AM »
What are you studying? Is it going to increase your income in the future? How far off will that be?

Also what do you mean by "the forms are almost ready to be signed"? In your first post you said you were going to both buy the property and build the property. Which one is it?

If it's a build, would you consider selling, and using the profit to top up your Super?

JetD

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Re: Some advice from Mustachian's sorely needed here!
« Reply #10 on: July 31, 2014, 08:06:26 PM »
Hi Marty,

I am studying law, but it's animal rights law sooo,  who knows what sort of income it will be. I don't know so I don't factor it in.

As to which one I am signing up for.. well, I am buying a block of land and building on it. I am going through the motions of land title and applying for a loan.  As for selling once it's built, It won't make money for quite some time,  It would be a tax break for me and at the present time negative geared. I don't want to put all my eggs in my super basket as I don't think it's the safest option.  I like property, I know it better.  I think I am possibly answering my own question here!! :)