Our property investment is losing money. Please help.

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Q.  Five years ago we bought an investment property in Port Douglas. It is a dual key apartment and is in a complex with 40 other apartments. We pay an interest only loan of over 400k. I am at my wits end because there are only a few months of the year that the rentals pay for the interest payments - around $3000 a month.

My husband and I have used our savings and have withdrawn $25000:00 from his super fund to assist in the payments. If we sold the unit at present we would lose about 80 -100k. We are close to retiring age and don’t want a huge debt hanging over our heads.

The other partner is my sister who can’t afford to put much money towards payments as she is on her own and doesn’t earn a lot of money. We thought that the rentals would cover the payments but with all the competition up there now, the units are rented at a lower price. Have you any suggestions? Read more

$360K in cash management account. Should I leave it there?

Q. I’m 57 work part time, own an investment property which is rented out.  I own my home and also have investment in trees.   Please advise me what to do with $360,000 in cash management account.   Should I put it into my super, buy another investment property or investment portfolio ???

Josie’s answer: Obviously I don’t know what income you would like to generate when you do finally retire, but sounds like you are on track to achieving a comfortable lifestyle in your twilight years.   My thoughts are as follows:- (please remember that it is general advice only) Read more

Property versus Shares - check out this great excel tool!

Is your house a palace?  During my money saving tips (without the BS) segment, I talked about how frustrated I get when people brag about how much they have made from buying and selling their home.

This is a typical conversation “I bought the house for $150K and sold for $300K, therefore, my profit was $150K”.   What a silly way to analyse the way an investment is performing.   Talk about sticking your head in the sand.

What about interest, maintenance, buying and selling costs?   I could come up with a big long list of expenses associated with property, but you are all clever enough to know what they are.  Don’t get me started on stamp duty.   Also, be careful when reading quoted returns published in newspapers.

For example, the latest figures might say that properties in your suburb have increased by 12% in the past year.   Sure it makes you feel good, but you fallen into the trap.   This is the average increase.  Your particular home might not represent the average.

How many sales occurred in your area?  If the number was small then the figures are not really a true indication of the price change.   The biggest mistake people make is to forget that lots of home owners and investors have renovated their properties.

A new kitchen and bathroom can easily cost $30K+.   Has the price in your area increased because of land values, or a greater desirability of people to live in these lovely newly refurbished houses.    Quoted figures do not take this into consideration.   Just food for thought.

Anyway, I also mentioned a great little tool that MLC have put together.   It’s an excel based tool that compares the established house price index for all the leading capital cities of Australia against a range of market indices, such as the All Ordinaries Accumulation Index (top 500 Aussie shares with income reinvested).

The data for the house prices were supplied by the Australian Bureau of Statistics (I therefore trust it).  A word of warning though.   The tool only supplies info to December 2007.  As you know the sharemarket has fallen a bit since that time, approximately 25%.  Surprisingly, the figures still look quite good for share investors.   Would love to know what you think.    Cheers and thanks for visiting the site.  Josie Kay

property versus shares - which is better? MLC Dec 07

ps.  this is a free service.  I rely heavily on word of mouth, so would be really chuffed if you told your family and mates about this website - free money saving techniques, advice & tips from a certified financial planner - no strings attached.

Josie’s Quick Money Saving Links:

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AND OF COURSE YOU MUST READ THIS: Don’t forget that the above information is general in nature and not specific to your goals and objectives. It is recommended that you seek personal financial advice specific to your needs.

Positive or negative gearing - Which is the best way to go?

Q. I am about to purchase an investment property. It is better to positively or negatively gear?

Josie’s answer - I am always puzzled why investors want to brag about their negatively geared investment.

Negative gearing means the expenses you have incurred, such as interest payments and maintenance is more than the income you have received from your property investment. Read more