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despairrrr

I was recently in a similar boat, ended up just selling the investment property and it feels like a huge weight was just lifted off my shoulders.


RiderByDay

We did the same thing. Felt good.


FigPlucka

+1 Sold in October 21. Felt like I was cashing out at the right time. No regrets. Feel safe looking at the funds in the offset.


Rob2moon

Smart move


HannahJulie

I am a big believer in making life easier. OP that sounds pretty crushing ATM... If you can get a price your happy with I think selling the investment property makes sense, and may help pay down some extra on your residence. Win win :)


Jase-90

I sold my property in December 2019 to give myself breathing room. Now I wish I could go back and punch myself for being such a short sighted fool. Was literally a $200k mistake. At the time it felt good, 3 years later though, not so good. I could have taken out $100k in equity, bought a second property and also put rent up from $600/week to $800/week. Instead I’m saving a larger deposit waiting to re-enter the market, which isn’t coming even with aggressive rate hikes. I learned my lesson. Never sell for comfort. Sell only when it’s part of your investment plan.


arejay007

Ah yes. Hindsight. What if it went the other way and you lost another 100k of equity?


DePraelen

Yeah, it's not as if anyone in 2019 could have predicted the 2020-2021 property spike, as it was largely tied to the Covid economic measures. No point beating yourself up over that.


despairrrr

This was on my mind aswell before selling, but the area I was in wasn't great, and just wasn't moving up, in the 7 years of owning it, I was lucky to actually break even when I sold.


modcon86

Salary seems very low for that much in loans. If it's too much why spread yourself so thin? What was the plan with the 'investment'?


mattchew1991

when I was 22, parents were breathing down my neck to invest in a property


Jcit878

so you've held for 9 years, seen (likely) nice capital gains. Just dump it mate, you cant afford it and you're still coming out on top. Not saying any of that in a mean sense, you did good, but its time to go


Bulkywon

Or move into your investment and sell your PPOR, avoiding CGT.


beomouse

Did you ever live in the 'investment' property you are considering to sell? Which property do you nominate as your PPOR? You have a 6 year exemption on CGT on the PPOR. So if you had lived in that place from when you bought it 9 years ago, then moved into another acquired apartment with your SO, is there anything you have done to suggest that the shared apartment is now your PPOR (other than live in it)?


[deleted]

As others have said, 70k is in no means a bad salary by any stretch, but it's definitely not "own 2 properties" salary. There are options like renting out a room, side hustle (uber), second jobs, refinancing, switching to interest only. A lot of these options only result in 5-10k a year. Really your salary is the one to look at. If you love your job, talk to your boss about a raise. It's an uncomfortable chat, but they will understand - in the end we are all in it for money. If there's no room to budge, look at government jobs for example: ​ [https://careers.vic.gov.au/jobs?salaryrange=4,5,6](https://careers.vic.gov.au/jobs?salaryrange=4,5,6) There's 706 jobs in the Vic public service paying 80-140k. Good place to start looking.


sardonicinterlude

I’m on 70k (5 years into my career) and after talking to my boss and it becoming clear there’s 0 hope of a raise even after 1.5 years there, I’ve turned to applying to the VPS and APS myself. My only concern is that I won’t be considered qualified or experienced enough to qualify for the roles I’ve applied for so far and earn the same or even 10k more than what I’m on now, without moving to a much lower-paid position first (and like OP, I have a mortgage). If any public sector workers are in the sub, I’d love to hear your perspective!


[deleted]

My tip is passion. I interview a lot of people for jobs and a lot of people have the misguided view that we are looking for the smartest person. Most of the time, we are actually looking for someone who really wants the job and seems like they'll stay for a while to learn and grow. If you go into an interview in the public service, make sure you really make the interviewier (preferably correctly) believe that you want to work for that department. Most skills are not that difficult to develop over a short period of time. Something like this: [https://careers.vic.gov.au/job/project-officer-703302?returnurl=https%3A//careers.vic.gov.au/jobs%3Fsalaryrange%3D4%2C5%2C6%26pageSize%3D100%26sortBy%3Dpublished\_date](https://careers.vic.gov.au/job/project-officer-703302?returnurl=https%3A//careers.vic.gov.au/jobs%3Fsalaryrange%3D4%2C5%2C6%26pageSize%3D100%26sortBy%3Dpublished_date) I would write a cover letter with 3 paragraphs: \- strength of organisational skills \- experience managing stakeholders (everyone has done this to some extent, just sugar it up) \- passion for improving Victoria's transport network


sardonicinterlude

Thank you so much! I value your advice and I’ll keep it in mind with my future applications!


Azersoth1234

Government jobs are very much tied to a formula. The questions in interviews are nearly identical. First, call the nominated person and ask some straightforward questions and is anyone acting in the role. It is possible the job is being advertised for that person, but because it is merit based and accountable there are lots of tricks used to get around that. Expect to apply to to many and get rejected. Most times they are looking to promote from within- grads are rads and the system is geared to promote them. Follow the guide online at APS jobs and memorise your answers, it is not how good you are but how you answer the questions, it is a tick a box exercise. Regardless of your exp private sector to policy usually means trying for APS 5 maybe 6 at a stretch. Once your in moving from 5 to 6 is straightforward, less so for EL1 and EL1 and above becomes much more challenging I.e less positions more applicants and niche knowledge requirements.


Shnizl

Did your parents also say if things got harder they’d help out or do they just like telling other people to take risks with their money?


uraniumcraniumunobta

Chances are they didn’t see any risk.


saitamoshi

Houses only go up son


noparking247

It has gone up though right? I genuinely don't know what the market has done for the last 9 years in Melbourne.


two2toe

Yep would have made a killing in the last 9 years. Was good advice


throw23w55443h

Yea that advice has done pretty well tbh


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[deleted]

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Flukemaster

A few years ago my parents were trying to I guess peer pressure me into going for a way more expensive property (twice what I was comfortable with) as well. I was pre-approved for the amount and everything too. In their defence it (was) working out *extremely* well for them. They genuinely thought they were giving me a helpful push to be bolder I think. Luckily, I am an irredeemable coward. Some of my friends in similar situations were not so lucky, and will be in a little trouble once things come unfixed.


[deleted]

It’s a weird one though because most people’s earning capacity goes up a lot from buying their first home to even a few years into the mortgage. Our household income has doubled in the last few years and that meant stretching when we did has really paid off. Our friends who’ve gone through similar income growth but wanted a mortgage that was comparable to their rent at the time found quickly that they outgrew their initial property but did not experience the same equity growth we have. It’s not for everyone but if you think you’re in an in-demand industry and your earning capacity isn’t close to flattening out, it’s not a bad idea to stretch.


ohimjustagirl

That only works if interest rates don't go up faster than your income. Which, to be fair, they usually don't, but everyone could see they had to go back up eventually.


JoeSchmeau

Bro have you ever met an Australian over the age of 50?


thewowdog

Nothing like the parental past performance guarantee.


buffalo_bill27

Underrated comment. If parents had made money through property, they should be in a position to help OP. If not, they should have not given this advice. Either way, OP should hit them up for a bit of breathing room if planning to stick out the recession. Either that or sell, he is likely ahead given length of ownership.


threeminutemonta

It won’t fetch what it would have sold last year at peak though you likely have done well over 10 years. Sell.


vayneonmymain

Hey mate. Totally understand the position you put yourself in. Unfortunately the situation with real estate and economy since the early 2000’s has drastically changed. My advice would be to sell property, pay off mortgage (and if you have change) put in your offset on your actual house. The interest rates will continue to rise, and even if they don’t, they won’t drop back to a comfortable level for yourself for a while. If you make a loss, it’s really shit, but investments always have risk. Lots of people with asset safety nets have preached and lied to the public that real estate is free money. There’s no better investment that putting yourself in financial security and you can sleep at night knowing if the RBA put up rates 5% In one year, you’re not going to lose the place you live in. Times like these, the average Joe needs to bunker down and hold onto the assets that are most important; their health, their family, their home and their job (in that order).


88snowy

Mrs is late 30’s and still being pressured by her parents to buy a house. In her Mum’s view she’s not successful in life until she’s balls deep in property debt. Ironic since has a very successful career and is now independently wealthy.


herbse34

If you bought it 9 years ago, the value has surely gone up enough to sell and use the profits for other investments?


MrNeverSatisfied

I won't tell you what to do but rate rises are not stopping or dropping any time soon. So somehow prepare for higher repayments?


rapier999

Depends on your definition of “anytime soon,” though. The general consensus is that we’re nearing the top of the hike cycle - probably only another .5% in it, and the RBA has softened their language - and a fair number of institutions see rates unwinding from late this year / early next year. There’s a good chance there’s some light at the end of the tunnel.


preparetodobattle

Might be top of the cycle but that doesn’t mean it’s going straight back down.


Whatdosheepdreamof

Could be another 12-18 months before cashflow is positive even taking on optimistic POV. Run numbers with 24 months at $350 neg cash flow and if you can somehow weather than then it might be worth it. A long term view is that there is no capital gains on your investment property for the next 36 months, so if you can make $260k on the principal, then you would not be taking on any more declines in value and relieving cost of living pressure. I wish the OP would at least open out on the possible numbers because from what he's said, he's just guessing.


huntersz

Good luck forecasting rates


Someone_was_loooking

Interesting that you chose to reply to the guy who predicted a drop and not the one who predicted more increases.


huntersz

Well… I can’t spam reddit with this comment can I? Goes both ways. Let’s wait for the next post 😄


IamBammBamm

tbf the RBA softened their language days before the fed came out and said they were again expecting to hike even higher than they thought a month or two ago.


Chii

> There’s a good chance there’s some light at the end of the tunnel. you hope for the best, but you plan for the worst.


Feeling-Tutor-6480

Why? Inflation is still at or near all time highs


bregro

People were saying that six months ago.


[deleted]

Inflation isn't even close to the target range and there's still plenty of international pressures that will force our rates higher. I'm not convinced we are near the top of the cycle at all.


Southern_Chef420

It is very hard with family but from now on never ever let ANYONE have any control over your financial decisions (excluding financial consultants, investment advisors, etc)


Inside-Island5678

Ironic that OP is asking for financial advice from strangers on reddit


modcon86

Was there a time frame for how long you would hold it? How many of the years you have owned it has it generated positive returns? I'd look to move it on and stabilise the property you share with your partner and remove the financial pressure. I'd probably also look to increase earning potential if you can.


Influence_Prudent

Same with my parents. I always snapped back, properties are for people to live in, not a countries investment.


TesticularVibrations

Don't worry mate, this sub is like that too. I've been laughed at here for saying that having a portfolio of 100% of property is a bad idea. "BuT yOu can'T lIve in YouR StOckS, PropAdee wOnT go tO 0". You're in the wrong place for advice, son. Lot of mouthbreathers here.


doubleunplussed

OP has in all likelihood made a killing. The problem with their investment is that it requires constant upkeep that they can't afford. I would prefer to diversify a bit more, I think that's definitely a valid view, but that is not really the problem here.


TesticularVibrations

In that case, the best investors are those that went 100% in Bitçoin 10 years ago. They made far more than a killing. More gains = you're a better investor. That's what we're working off now. Risk management, diversification, etc., don't matter. Just whoever happens to make the most gains in an arbitary time period.


doubleunplussed

I'm not making a claim based on last performance alone. Their investment is likely still pretty good now and in the future, and their problem is one of cashflow. > Risk management, diversification, etc., don't matter. Just whoever happens to make the most gains in an arbitary time period. This is a strawman, I explicitly said I would go for more diversification, don't be a jerk. It's just that cashflow is the primary problem here.


TesticularVibrations

Having 100% of your portfolio in a single asset within a single asset class is not a wise investment decision. You literally cannot argue the point. This is basic finance and the evidence is **OVERWHELMINGLY** in my favour. I won't go back and forth on this one. Sorry, Double.


i_coconuts

Seeing as you've had the IP for 10 years you're surely up? i'd sell the IP, dump the profit in your offset to massively reduce your exposure to ongoing interest rate changes and to deal with the cap gains at tax time. Then you'll have 1 reasonably small mortgage where most of the payments will be cutting down the principal. Probably be a lot more comfortable on your income and can start saving again and put your savings into index funds for your future / holidays and other fun things rather than giving everything to the banks!


aussie_nobody

Sell it. Jump back in 12/24 months of you want another one.


Jase-90

Or he could just refinance it for 30 years. Put the rent up, try to get a higher paying job. Selling will cost the OP ~$50k+ in CGT (at a guess), $20k in sale fees, and another $20k in stamp duty to re-buy. That’s ~$90k it’ll cost to simply sell and buy again, but the new loan will likely be on a 30 year term anyway. At a guess based on rental prices, the property could be worth $60k more in 24 months, so trying to time the market by selling to re-buy could cost the OP as much as $150k.


Jacyan

Terrible advice. People are just upvoting because they 'want to see a crash'. Entry and exit costs to buying and selling property are very high. It's never going to be worth it. Even if the market dips a further 10%+ you're barely making back the cost. Let alone all the time and effort. On top of the risk of you can never properly time the bottom of the market.


aussie_nobody

The "investment" is costing him 10k a year in direct costs, excluding the house price decrease. If he loses 5% in value that's another 30k this year. So his investment has cost him 40k. It is obviously impacting his ability to enjoy his life. He should cash out, enjoy his win and get back into the game when is has financial capacity to. Stamp duty suck, selling costs suck, but it's better than being in a hole like OP


Jacyan

The 'direct costs' includes principal repayments into the house. That's not really a cost. You're paying it off - it's forced savings Property isn't going to grow every year. It's like the stock market, some years are good, some years are bad. But if you hold on long term, it averages out to be good. Right now isn't a good year, but that doesn't mean you sell your shares and try to time the bottom of the market and buy in again. It's even more so punishing with property given all the high transaction costs


aussie_nobody

So OP should eat 2 minute noodles and tinned tuna for 2 years till it levels out? If he wasn't struggling then yeh, your right. But he is over leveraged. He doesn't have the money to "save" He needs to cash out, enjoy life and go back to property when his head is above water.


Jase-90

Or the OP could just refinance to extend the loan term to reduce the minimum payments, wait until the lease ends and raise the rent. The IP will be worth a lot more than $560k in 3 years time and the rent in 3 years time will probably be 20+% on where it currently is. There is no market where rent surges and property values stagnate. They are generally correlated. Extend the loan term. The future capital gains will be more than worth it. Have a guess at where things will be 12 months from now: Scenario 1: Rates at 4% or higher. That’ll mean inflation is still a problem, which means food, fuel, energy and housing is still high. Likely the OP has gotten more capital gains and receiving higher rent. Scenario 2: RBA overdid the rates and had to cut them. The OP can now breath easier again, the property value may have dipped, but he didn’t have any CGT to pay and the rate cuts will likely cause the market to surge again. In both situations it’ll be a good time to own, harder time to buy. Scenario 3: Rates have gone to ~6% or more and people are feeling the pressure. Inflation has been extremely stubborn and the RBA have no idea what to do. Two things would happen, either the country goes to shit or the more likely scenario is that it goes on like this for a short time and then we end up at Scenario 2. The RBA doesn’t want inflation, but they won’t fight it so hard that the cost of Housing cripples the country. It’s everyone’s single biggest expense and for most investors their biggest asset.


Jacyan

He's made a lot of money on the property. OP are you forgetting this? Over the next 10 years, if you hold, you will eventually make any of the negative cashflow you're having now back and more.


RobertSmith1979

Just think about what you personally want from you’re life going forward and do it. If you’re 31 with your partner; maybe you’re thinking about a family sometime in the near term? Sounds like you could bet a nice little profit if you sold, would free up some cash flow and you can pay a nice chunk of your current place and have a nice stress free time if family is on the cards? Or if you’re dead keen on keeping the place then well figure out how to make more money, simple as that really and see how much of a risk you want to take as to how much rates may ‘drop’ - might only be .5% after another .5% in rises and you’ll still be in the same place


[deleted]

I was in a similar position except on the other side of having kids. Sold investment and now have a tiny little mortgage... Apparently there have been rate rises? I'm in the OP should sell camp. Can always look to reinvest later.


Paceandtoil

You’d liquidate in this market. Get that cash working for you rather than being a debt you’re servicing on what is a depreciating asset atm. This is contrary to Australian financial culture especially when influenced by boomers who have made out like bandits on this racket.


evilducky444

![gif](giphy|SP7ik5yV6FlMk|downsized) This meme is going to get a workout this year.


tekkado

Isn’t this the issue with the market at the moment? Landlords holding on to property and jacking up rent because renters are desperate and covering the landlord. End result market crash when no renters and need to sell because rates keep going up? But obviously can’t blame a landlord charging a price they can get - just seems unsustainable and moreof these stories will pop up as rates go up.


blaertes

There will never be no renters in this market, or for the foreseeable future.


tekkado

Well, enough to sustain all the landlords? My point in question is OP.


blaertes

For those smaller landlords like OP, two properties, they will struggle and likely sell out. The established capital and larger landholders will snap up those that sell out. With immigration and builders not keeping up with demand and little to 0 real action by the government, it seems the renter population will stay huge. It’s not always a renter becoming a buyer after someone else sells out.


tekkado

I see your point and makes sense. You’ve opened up a new point of thinking my brain can’t handle at the moment with the idea of corporate landlords. Well I know for one thing homelessness is definitely going up.


Substantial_Beyond19

Sell sell sell


beauwilliams

take a hit. every best financial position i've ever made was taking a hit. 10% hit is better than 50%. liquidity is king. if you look at the SVB situation right now, we are currently looking at significant turbulence in the next coming months and this will lead to more strain on every corner financial system. it is a good time to be very protective over oneself and to be careful and especially not greedy


CampOrange

How did we get to a point where someone on 70k a year can own 2 properties. Honestly scares me.


Zokilala

He bought his first when he was living with his parents I’d say. Second is a joint loan with his partner. Not that hard to understand.


CampOrange

Maybe the simplicity of it all is the issue then. His 2nd property is still another 250k loan on a 70k salary.


Zokilala

That should be easily manageable


Influence_Prudent

Because they compete in a market of people who need a place to live, outbid them and then charge as much rent as the buyers probably would have paid in mortgages to help them pay off their larger mortgage.


malleebull

Excellent summary of Australia’s property market.


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mattchew1991

working since I was 18 after I finished school on like $620 a week, I'd pay my parents $100 a week to help out, they never asked but I guess it was the right thing to do. essentially saved $300 a week for 4 years, was able to buy a 3 bedroom place for $330k. very lucky to be able to save at home and only pay $100 a week in rent


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Diligent-streak-5588

We’re in a similar type position. Just sold our investment - still waiting for settlement. Far too much out of pocket for this stage in our lives. Will regroup and invest again in the future, but probably not residential.


MrVirly

Yeah man, sell. Imagine how much better you'll feel with such a small debt left over in comparison.


nettiespaghettie

I think property prices will start to drop as people start to sell. So that's worth beating in mind. I have no real way of knowing that but it seems like a real possibility.


[deleted]

Mate, how on earth can you have two property loans on 70k a year?


rollingstone1

thats was my immediate thought. batshit insane.


[deleted]

is OP the stripper from the big short?


zductiv

Because one appears to be paid off jointly, and the other is offset by rental income.


Particular-Report-13

Is the IP interest only? If you’re paying P&I I’d switch to interest only for a few years, then reassess.


DrahKir67

Good advice. I'm in a variation of this. Better salary but bigger loan. I'm going through the process to convert the IP loan to interest only. That'll save quite a bit of money each month. It's kicking the can down the road at the moment but the intent is to hold until the market recovers. For OP, it's a matter of determining if this would allow them to hold. If they'll still be forced to sell (in, say, 6 months) for a similar price as now but having paid more in interest then that wouldn't be a good outcome.


Icy_Excitement_4100

If you have any non-tax deductible debt (a PPOR loan), you should always have tax-deductible debt (IP loan) set at interest only. Pay off your non-deductible debt before paying off ANY tax deductible debt.


DrahKir67

Seems a lot of banks won't let you keep on IO for more than 5 years. I guess then that refinancing has to be considered. I'm not a fan of keeping as IO forever. It's a useful tool when you first buy and are waiting for rents, pay rises etc to make things easier. Or in situations like now when there's a squeeze on.


Icy_Excitement_4100

My IP (sold last year) was Interest Only with the same lender for over 10 years. I didn't say keep it IO forever, I said keep deductible debt IO until non-deductible debt is fully paid. That's the most tax effective investment strategy.


DrahKir67

Yes. Agreed.


onepoundfeesh

Also there is usually the ability to go on an IO loan with a different bank. You can essentially keep investment properties on IO as long as you want


rise_and_revolt

Honestly I'm a bit of a contrarian but I don't see this as good advice. It is becoming established as conventional wisdom to do this, and since that's the case there will be many many people with this strategy. The net result is there will be boatloads of people all trying to wait out a crash "until the market recovers" who will presumably all try to sell if that ever eventuates (which would push the market lower again), OR would be forced to sell eventually when the interest repayments become too much of a drag and the market still hasn't recovered to the extent they like. Effectively I can see this strategy simply having a "smoothing" effect on the market declines since it's kind of just deferring sales for another day, but in the meantime those people are still getting stung by (high) interest rates. No such thing as a free lunch.


sportandracing

How does someone on an income of $70k get one loan, let alone a second one? These banks have a lot to answer for.


rplej

He's held the IP for 10 years. Probably has a good bit of equity in it.


the_doesnot

On $70k salary I’d sell. You’ve definitely made money holding it for so long and you actually probably want to sell before there are too many stories like yours.


BigGaggy222

Definitely sell and pay off PPOR. Safety, security and peace of mind.


rangebob

650 a month isn't a huge amount. For such a small amount id just do some uber eats for a few hours a week tbh or any side hustle will do assuming you were keen on keeping it that is


Latter_Box9967

And is that between two people? That’s like 3 smashed avos a week.


[deleted]

Two/three nights of food delivery will help cover the shortfall and the insurance+fees. I’d probably hold on to it, but also I understand it could create a lot of friction in the relationship. Is it worth risking the relationship for $1000/month? Only OP can answer that.


[deleted]

Absolutely not doable on 70k, Sell


___Milkman___

Can you afford to be a landlord? That means, can you afford an extended period with no tenant? (Ok this is unlikely in the current environment). How about emergency extensive repairs? You are dealing with people's homes, people's lives and sense of security. If you can't afford to absorb considerable costs then there is no shame in tapping out.


4614065

Personally I’d try to hold on but we all have our thresholds. If you sell now you’re also selling into a weak market for what I’m guessing your IP is in. You may feel relief now but could kick yourself down the track if your goal was to make capital gains on the place. It really boils down to how much heat you can handle.


-V8-

He's held it for over 10 years from what I understand. He's already mad great capital gains.


4614065

Maybe. We don’t know enough to make that assumption. It could be a run-down one-bedder that needed renovations when he bought it and remains unrenovated. 🤷🏽‍♀️


-V8-

That wouldn't make a difference. You'd be hard pressed finding a property that hasn't made decent capital gains in the past 10+ years.


4614065

Depends what you call ‘decent.’ Edit: took me a couple of minutes but I just found one: https://www.domain.com.au/property-profile/808-53-batman-street-west-melbourne-vic-3003


Ir0nTys0n

Jus to clarify you’re paying 50% of the PPOR loan and 100% of the investment loan?


Thisisliving23

We were in a similar situation. Ended up selling the investment property and the weight that came off our shoulders was indescribable!


Psychological_Ask880

If you can't afford it sell it.....


1jwoz

Should be investing in yourself if you're only on 70k at 31


Money_killer

If U can't afford it U can't afford it straight forward really


Mash_man710

What's the stress worth? A few comments about taking out a side hustle or renting a room but is that how you want to live? Maybe get some proper financial advice but don't be afraid to cut and run if that suits your risk profile and lifestyle. I'd rather live comfortably with lower debt on PPOR than major stress on the chance I may make a return on investment.


hogey74

To be defensive or expansive in the face of stress and uncertainty. Serious questions mate: How much of this did you game out? How shocked are you to be where you are? If this is all a shock and you feel out of your depth, IMO now is the time to sell out of the renter if you're going to do it. Over the next few years you may realize progressively less of that capital growth methinks. And I've never heard of a cash-strapped land lord being worth a pinch of shit. Otherwise grow your income pronto and get ahead of this.


[deleted]

You’ll never make it onto the realestate.com.au front page with this kind of attitude. Double down I say.


NegotiationExternal1

Sell, dump it in your current loan. You can reinvest later but you're still significantly ahead by having less dent in this time.


[deleted]

$500k debt @ 6% rates let’s call it (yes can be lower but then you’d have principal repayments). So that’s $30k outgoings per annum. Add other stuff like land tax council rates maybe $35k out of pocket. $70k salary. After tax is maybe $58k? So left over $23k. Maybe some of your $35k out of pocket is tax deductible so you might get a small $5k benefit. Net income becomes $28k Pa or $500/week. Seems ok. Just eat out less and drink less beer


basic_tacticz

Your 60k is your buffer for tough times, use that in the meantime until you figure out how to increase your income / lower expenses / both.. Get a depreciation schedule done on the IP, if you haven’t done this already. Then speak to your accountant about competing a tax variation 1515 form (essentially this will mean you pay a bit less tax each pay run and have more net income per pay, i.e instead of getting a 5k tax refund at tax time, you could end up paying say ~$400 less per month in tax and getting ~$500 back at tax time instead). You could also speak to a strategic mortgage broker and investigate refinancing one or both loans (possibly lowering ur repayments or collecting 2-4k cash bonus), push one or both loans back out to 30 years, which will lower your current repayments (at the expense of paying more tax overall), possibly going interest-only for 12-24 months until you can get it together. Worst case scenario you could rent out your PPOR, while renting out something a bit cheaper to live for 12-36 months to increase cashflow a bit more… At the end of the day, i’d be holding the asset and riding through this wave, your future 50-60 year old self will be grateful that you stuck it out in 2023! you’re likely to be getting 5-10k tax return in August if you have a depreciation schedule for your current IP already, and you’re claiming everything that you’re entitled to claim, that will buy you some more time too if you don’t blow the money.


[deleted]

[удалено]


moonshadow50

Is it though? Or is it just a natural balancing/slowing that is part of the goal of rate hikes? It is a shit situation to be in, and I'm sure OP is not alone, but this post is suggesting that OP could chose to sell their IP and more comfortably pay off their PPOR mortgage? After so many people here complaining about landlords, and I've seen some posts/comments about owning an IP being "free money" (clearly wrong, mind you) isn't this the sort of balance we kind of want? (Not specifically talking about OP here, but wouldn't an ideal balance be that less people are buying IPs, thus leaving more of the market open for people getting PPOR loans - whether A turns into B is the undetermined part here). As for OP - I feel for them. I said above that they are not alone in this. Clearly they have a financial and life decision to make, but my simple view is that if an investment is costing you more than it is bringing in, and you don't think you can wear that cost for the time it might take for it to be profitable, then it might be worth moving on from it. In this case also depends what the return will be on selling either the IP or PPOR will be compared to the loan remaining, and whether he/she is happy with a long term commitment with their partner and staying in the PPOR (or even moving to the IP if that made the most sense for them as a couple)


IllMoney69

Earning $70k a year with two properties doesn’t seem unusual to you in the first place?


AnOldMate

It was so clear, people buying what they can’t afford, buying in a market that was a complete trap for those that shouldn’t have been able to buy.


arcadefiery

Not really OP can sell it and someone else will buy it Makes no difference in the end


Deranged_Idiot

No, it’s people not using any common sense and gambling on property always been a good investment.


xyzxyz8888

If dinner parties with other adults have taught me anything. Property never goes down. Just buy another one. Make sure it’s negatively geared so you can mention that to your friends at the next dinner party. Then profit.


Emotional-Bid-4173

Well it's entirely possible that rates won't be going back down again for several years. Yes yes, they predict that rates will go down at the end of the year. These people are attempting to predict an economic 'accident' like 2008. It is difficult to do and they are not michael burry, and even michael burry has been wrong 20 times for each time he's been right. If nothing goes too wrong, (SVB aside), best case, rates will STAY at 5-6% for years. That's years of paying $650 a month. That's $15,600 after tax. So you can 'own' property. Is it really an investment if your losing money? I have the exact same kind of parents that view buying property like a bragging right to their friends "My daughter owns 3 investment properties!". If it's losing you money, you might as well just buy a Model S, or luxury car. Similar bragging rights, less risk, about the same financial loss. If you want an investment, just liquidate your profits and put it into 5.5% bonds for a few years. 5.5 Risk free is a bit insane atm.


ratemyanxiety

Is the rent at market rate? If not you can always increase it closer to market rate. It’ll be years til new supply comes on and with immigration rent prices won’t be coming down anytime soon That combined with maybe picking up some extra work should see you through.


DownSouthDesmond

Refinance to interest only would save several hundred per month, could do that for a few years and wait and see. If it's already interest only and you're losing that much then I've really got no idea what you're doing and selling might be your only choice. Rent should really be covering more than what it is. My IP loan is a similar value but on P&I and only just swinging back into negative geared territory now mainly due to PM fees and maintenance. Going IO would make it positively geared by a couple hundred a month.


deeebeeeeee

Surely if your property is already negatively geared on P&I, it will be even more so on IO due to the higher interest rate. I think you’re conflating cash-flow and positive/negative gearing.


DownSouthDesmond

You're not paying any principal so of course it's cheaper on IO. The difference in interest rate is negligible, atleast with my lender this week it was 0.04% higher than the P&I equivalent. OP is struggling with repayments, this would assist unless their IO rate was around 1.5-2% higher than the respective P&I offering.


Oh_FFS_1602

It may come down to what you’re willing to sacrifice to keep it, or if there is nothing you would give up to hold onto it. Time: can you do extra hours at work or pick up a second job? If doing something like Uber factor in costs, tax etc too. This applied to your partner too if they can contribute to something to free up money towards the loans. Discretionary spending: I imagine with 2 properties and $70k income there may not be a big budget for this. Can you go through all your spending to see if there’s anything you can cut down or give up, either temporarily or permanently. Other spending: check your set up for mobile plans, utilities, internet, insurances. Get quotes from competitors and see if you can get similar service at a better rate Peace of mind: How would you feel if you sold it and out the equity (less selling costs and capital gains tax) against your PPOR loan? why did you buy the IP in the first place? How long did you intend to have it for? What is the expected growth, and is it worth holding out a bit longer? What happens if something goes weren’t at the IP and you have to fund a repair? No one likes a poor landlord that delays and avoids spending money on the property, you need to be able to cover urgent repairs and it sounds like your budget is pretty stretched.


Chlooo2212

Im in a similar position to you. We have inv property on NSW south coast and live up in North QLD. With both properties our repayments are now $4500 a month. We have two toddlers so I work part time but now looking at FT as in my career I have a lot of earning potential. Thinking we will hold on too it as long as we can as market has dropped about 100K since this time last year.


douganater

Yep sell.Give more people a chance to home own and feel a part of your soul come back as you are no longer a Landlord


RightioThen

Depends on your industry but 70k isn't a lot. Can you ask for a raise or get a higher paying gig?


Far_Mark_9556

If your struggling then sell. Alternatively before you do ask for an interest rate reduction on your loans.


shreken

A. come up with more money. Get a bigger return in the future. B. sell, have more money, have more fun today. Can't have everything. And atm you gotta make some sacrifices now if you want more in the future.


oneaccounti

Property is the worst investment with high interest rates, you have to be crazy to invest on 3-4% yields before expenses and pay 5-6% on interest rates


Zokilala

I think you need to look at your figures again as they don’t sound right. Remember that you can claim for expenses for the IP, that includes claiming interest, insurance, depreciation Do you have a depreciation schedule? If not, get one How much rent are you receiving per week? Has the property appreciated over the years?


davidjoreline

You could look at an interest only loan on the rental to lower your loan repayments, if you are on P & I at present. Some predict that when all the loans out there who were on a fixed rate that end this year, could increase the amount of loan defaults. More repossessed houses on the market in the past has lower the overall value of the properties. I would sell the rental property, invest the equity in a term deposit at a reasonable rate, and wait for the property market to stablise. Take the capital gain. Then when things stabilise by again


Shampayne__

If your investment is on P&I, I’d switch to interest only


R_W0bz

If you can’t afford something you sell it. I’m sorry but this country needs to learn this.


Luskan_Telamon

You couldn't afford 2 mortgages before the rate hikes. Sell the investment asap because the market isn't going to be kind when all the fixed rate investment apartments (just like yours) hit the market from July - December. Pay off your first home loan with the cash. Once it is paid off / offset full, then think about another investment.


MyFeb23FakeAccount

Sell PPOR and move into investment property. Or drive uber eats 2 nights a week, will pay the shortfall easily


tacx127

2 mortgages on 70k salary is madness


[deleted]

And so it begins. Reminds me of a game I used to play 20 years ago, "more slaves! more slaves!" Larping for the neoliberal wet dream.


TheBunningsSausage

Have you looked at the numbers if you switch to interest only?


West48th

OP should probably do this but it’s kind of amusing to me that he’s going to switch to interest only at the worst time. You should ideally be doing the opposite. I.e. when rates are low there’s little return in paying down principal. When they rise you get a percent return for whatever you pay down. Eg if rates are at 5% and you pay off 10k of your loan that’s $500 per year saved.


DrahKir67

Depends on any mortgage on the PPOR. I'm converting to IO on my investment property so I can direct more principle payments to the PPOR on the mortgage. Edit: spelling (bloody auto correct)


West48th

For sure. You should always be getting the best ‘return’ wherever possible. And paying down high interest debt is a ‘return’ even if people don’t think about it that way. I know a lot of extremely wealthy people who had mega mortgages though when rates were rock bottom who never paid a cent of principal off and instead were getting better returns elsewhere. Those people are now starting to pay huge lump sums off their mortgages.


TheBunningsSausage

Great way of thinking about it.


moonshadow50

But would that really be a good idea? If rates keep rising and the housing market doesn't bounce back up anytime soon (or at least within the time OP can afford to be making a loss) you will then just be dumping more and more money into it without actually dropping your loan amount? I can't see rates getting lower anytime soon, and definitely not before they get worse. Look, I've never owned an IP. But I've just never understood the idea of Interest only loans unless you are earning a profit with rent, or you expect the property to increase in value fast enough/high enough that you will be able to sell for a profit over and above your cumulative interest payments. Neither seem to be the case here. Edit: Why downvote me without a comment/explanation? I am very happy to listen to anyone who can correct me, but my simple take was that interest only loans only make sense for either of the situations I have outlined above, and if neither apply (ie. not renting at a profit, or not able to hold it long enough to sell at a profit) then they are just dead money. Am I wrong?


ExternalSky

People don’t want to hear the truth as they’re mixing emotion and investment, that’s why you’re being downvoted. You nailed it regarding the two reasons to go IO. Do people really expect housing to go on another 20 year run in a few years time? The basis of the last 20 years was simply due to interest rate cuts which is as we’ve seen, not sustainable. It’s more likely that we see a deleveraging over the next few years as property becomes unattractive whilst interest rates stay ‘higher’ for longer. After that, it’s really anyone’s guess. Mass migration is the long term bull case, but the bear case is crystal clear in the medium term (interest rates + credit growth).


shrugmeh

This argument sounded better this time last year. It was still wrong, but it sounded better. We're now at cash rate target level last seen in 2012. How did property go since 2012?


ExternalSky

Interest rates back at 2012 levels with property prices at 2020/2021 levels. Property increase is a product of credit growth. If no new participants (or reduced number) enter the market, prices cannot rise until an equilibrium is reached. This is a simple fact.


shrugmeh

Interest rates at 2012 levels - fact. Prices at 2021 levels - fact. Everything else isn't fact.


shrugmeh

Two things. >Neither seem to be the case here. That's a prediction about interest rates and prices. So it's not very useful. The other point is that in most scenarios, all principal repayments should be going to the PPOR. The investment interest rate is going to be a bit higher, so there's that going against that maxim, but, generally, paying down the non tax-deductible debt is the clear winner over paying down the tax deductible debt. Again, particular circumstances might invalidate that, but that's the general approach. Finally, we don't even know whether the thing is actually positively geared without knowing whether the IO repayments would be smaller than (market) rent. There is no justification in forced savings in the form of principal repayment on it, in a time of relative hardship.


moonshadow50

Thanks for the actual reply. And yes, what you say does make a lot of sense. I guess my only comments are that I'm intentionally trying not to make a specific prediction: I am just trying to point out the possibility. It all ends up being about risk, and how much risk you are willing to wear (both emotionally and financially). And in OP's case it sounds like he/she probably is getting to the end of what they can wear. (Which my guess is why they posted this to ask for advice)... I personally would just be much less willing to wear that risk in the current climate if all I could afford to be paying was interest only at a net loss, and if I wasn't confident of being able to keep that going while waiting to see if/when the market goes up again. I just don't see why it would be a bad outcome to sell now if you think you have to (as long as you are paying off more than the loan) - put all of that into an offset account for the PPOR and then look to get back into the market for an IP when you are 1. more financially able and 2. more confident in the market? If it was able to be positive geared - then it would make sense (and would meet one of my points above). Then it's not really an issue and I don't think OP would be posting here.


althemighty

Second job time.


megablast

No way. Double down. Buy a couple more properties. Pay of the one you are having trouble with with the rent from the new ones. Easy.


gaynewetsky

Would you earn more rent from the PPOR if you moved into the IP?


Jase-90

Hold on to the property. Inflationary periods are the single biggest property growth time. As soon as you get the opportunity to put your rent up, raise it significantly. There are no spare properties on the market, rents are going through the roof. There’s less buyers in the market. The people that sell their investment properties during this period will be the ones in 3 years time saying I wish I never sold that! These are the market fundamentals: Building costs are up 30% in the past 2 years Apartments and multiplexes aren’t being built Immigration is at record levels and more coming Rental properties are very scarce Inflation increases property values Rents and property prices will continue to rise, wages will continue to rise. I had a discussion with a colleague at work the other day and she was feeling guilty about putting her tenants rent up from $480 to $500, but market appraisal said it’s worth $550. I told her she’s a fool if she leaves it the same and more of a fool if she doesn’t put it up to or above the market appraisal. She raised it to $550 and the tenants accepted. She is now sleeping much happier knowing she still has her investment property and that their rent is covering her costs again. Once rates pause or get cut again where do you think prices on properties will go? Personally I would much rather be wanting my property to be going up in value at that time instead of trying to be buying one or be priced out


Rob2moon

Sell investment immediately. You’ll be happy you got out before it goes lower. Look at NZ… liquidity is king.


Master_Skin_3171

Isn’t this the point of negative gearing?


Typical-Ad-1934

Talk to your partner about coming onboard with your rental. Reality is he/she can possibly make a claim on that property too if you were to seperate so it’s not like it’s safe just because their name isn’t on it. I’d try and work out a fair deal to handle it together


bonita_xox

Yes... How is everyone ignoring the fact about partner? Good to see comment at last


TrevReznik

1.9k a month is less than what most people would be paying on rent alone. You can probably tough this out, if it's what you really want. How much do you enjoy being the land lord?


waffleowaf

I am playing the smallest violin here for you .


mr--godot

You don't need to kowtow to the jealous poors with your statement of privilege.


Furzan95

Fkn yolo it bro and hold. Cut back unwarranted spending and buy what you need.


FizzKaleefa

Why not use the money on offset to actually offset your monthly payments


Capital-Ride-6498

With house prices not increasing it makes it even worse. Normally your losses don't feel as bad when your house is going up a bucket load in value.


throwawayaocmnqp

Keep the property. There's plenty of ways to bridge the $650 gap for another year or two, even with another 0.25% rise (0.5% might be different though) Rent out a room in your PPOR, Wait until tax refund comes in Aug (i.e. learn how to do your taxes now if you dont know already), Refinance and use the refinance bonus.


dr_of_shield

Switch to interest only during this high internet spell and maximise tax offsets, then place as much money as you can into the offset for your owner occupied


AlphaWhiskeyHotel

Hold mate. Switch to Interest Only to reduce your outgoings and increase rent to cover the shortfall if you can. This is the worst time to sell.


Ozzie1310

Check with you bank if you can go interest only to weather out the current times. As it won’t fetch you a good price in today’s market. Or refinance and amortise over 30 years to lower repayments. Or both of the above. But again, depends on your financial situation. If you are not able to afford in the end- better check with your bank if they can provide some sort of financial assistance. Lastly, if nothing works, sell.


Esquatcho_Mundo

What’s the net balance look like if you go interest only? Also how long have you had it? Could you refinance for 30y to improve it further?


mehmehhh007

Sell, don’t put yourself under pressure for an investment.


AussieSPAZR

I personally would try to keep the 2 properties. When you want to eventually upgrade your PPOR, you could sell your current PPOR and use the equity from the IP to help. Whereas if you only have a PPOR, you will find it more difficult to upgrade as you'll be selling in the same market that you're buying in. Make sure you have an accountant and you're claiming your losses. You have 60k in offset - meaning you can handle a few years of losses and still hold onto the property. I think you'll find a lot of properties are negative geared. Especially with all of these rate rises.


Fit-Swim-3379

I wouldn't sell. Inflation will over time lead to higher wages, which in turn is likely to elevate rents (alongside other factors like population growth and lower construction). While high interests rates are hurting now, high inflation will over time mean that your loan becomes smaller relative to your personal income and rent. We saw the same in the 80s when interest rates were high. Those who got through it were better off. Generally, high inflation benefits those with debt whilst hurting those with assets (i.e. paid off assets). ETA: as others said, switch to interest only if it isn't already. Your higher future rental income will help to offset (in part at least) any delay in paying down principle.


[deleted]

If you haven't already, push the rent up on the rental asap to buy yourself some time.


H-bomb-doubt

Stick with the plan, you purchased it as a long term investment. I assume your paying IO. 30 years is a long time to worry about 1 or year of higher interest when you can also claim back some of it.


floydtaylor

OP. Do not sell. Get another Job. Parttime OR FTE. On nights and weekends. Put that cash as down payments to reduce mortgage.