Advice/Opinions Please!

Hi All,

I have a bit of a dilemma which maybe some of you guys can assist with.

Currently I have 6 IP's;

5 x 2br townhouses, average purchase price was $230k, loans are avg. $218k
and all 5 are rented at avg. $310/week.
Returning around $1k/month +ve cash flow.
Great locations, waiting list of tenants, never given any problems, I call these my 'Golden Geese'
The plan is to keep forever and rental returns will fund my retirement, also while reducing the outstanding loans.

Then there's no.6, a waterfront property that has been in my family for 4 generations. It almost bankrupted my father to keep it in the family (long story) and because I had a good income and equity I purchased it from him for the outstanding loan amount, $868k, while market value is around $1.2m.

The house is rented at $720/week and mortgage repayments are avg. $3600/month, making it negative cash flow which i don't mind, but am planning to move back to Australia next year and start a family (giving up my tax-free $135k salary) and I know I will have a lot more expenses and a lot less available cash.

Option 1. Sell the waterfront heirloom, disappoint my dad, spread the profits over the remaining 5 IP's and collect the sizable cashflow every month.

Option 2. Sell the waterfront heirloom, disappoint my dad, use the profits to find/obtain more Golden Geese.

Option 3. Sell the 5 Golden Geese, sink the profits into the waterfront house and hope it breaks even/makes a +ve cashflow. Possibly make it PPOR one day.

What do you guys/girls think?

 

Option 4 - keep all.

You have to live somewhere - you could live in the waterfront or keep renting it out and you live elsewhere. What would these figures look like?

What is the capital growth prospects?

 

Hi just_byron,

Seems like you're sitting in a pretty good position with all those quality assets.

If the 5 "golden geese" are making money and growing in value, why sell them. They should continue to do so in the future and you'd be losing all of that future wealth.

If I figure correctly, your investment properties are pretty much cash flow neutral, if you consider the $1000 per month is covering the negative gearing difference on your father's heirloom property.

So, all in all they are not really costing you anything to hold them. Is that correct?

If this is the case, and you can continue to earn your good income here in Australia, then I would sit on these for a few years longer and work on reducing the overall gearing levels on your assets in order to increase your equity.

Then, when you want to "retire" and utilise the income from these assets, you may only have to sell down some of your golden geese to access the income from your assets instead of all of them. Currently, if I use your numbers, you only have about $60,000 in equity in these 5 properties. This needs to grow.

You can then move into the family heirloom and live off the other properties income.

However, this may not be enough to fund a decent lifestyle in retirement, so bumping up your Super would also be a wise decision. The low tax environment will certainly help.

Have you considered a Self Managed Super Fund and using some of your super to fund additional property purchases? There are obviously a lot of factors to consider the main one being your time to retirement.

Bottom line, if you can, and you have the time, let your assets grow a little more, and work on expanding your asset base with other growth investments such as shares or managed funds. Put your Super either with a SMSF, or just work with your adviser to allocate your funds into some good growth investments, and just keep on building on what you already have in place.

There's no simple solution as only you know the specifics of your situation, but in my opinion, the end goal is to create cashflow to fund your retirement, and, in your situation, it would be a shame to lose your family's heirloom. So reduce debt levels, and expand your asset base into other areas. If you're not making at least 15% p.a. (income and growth), then this might be a reason to look at moving funds from your property into other asset classes.

Hope this helps.