My sister and I own a terrace in Sydney Australia valued around 650K$Aud and we still owe 260K$Aud through a bank mortgage. It is rented for 550$Aud. If we completed a basic renovation we could raise this 650$Aud. So each year we have to find around 10K$Aud to cover the deficit in the loan repayment. We have 50K$Aud in a term deposit which rolls over 09/07/12.My sister is a teacher in Italy and makes about 1500E/mth (1100£) and I have been on maternity leave and doing the minimum work. I have 15 years marketing manager experience working on accounts such as Novotel, Mercure and the restaurant sector in Australia and Europe.We have lived overseas for 8 years now and we want to buy a small hotel or bed and breakfast with standard small hotel offering but also offering immersion and Summer English courses (in partnership with a successful Irish school now at 10yrs trading), here in the UK. The property we are looking at is around 600K£. We have completed the business plan and before we sell anything we wanted to see all options.If we sell the property in Australia, after fees and transfer costs we should get around 225K£. Is there a way to keep the Sydney property with an interest only loan or something else and make the purchase here? Being totally greedy.Is there a way to use one as security for the second purchase?Is there a more effective way to transfer the funds?Any advice would be really welcome.
Country/State/Province of question: UK, Scotland
We have only spoken to our current bank manager and he seemed a bit overwhelmed with the idea of working internationally.
Hello and welcome...
Kindly remain online while I prepare your reply
If you have no plans to be in Australia, why do you intend to keep the property there ?
Is that a Investment property ?
Well it is our only security and no it really isn't acting as an investment as we have to keep topping it up it isn't making us money.
To begin with, I am of the opinion that if you get the renovation done, you are adding just $100 (from $550 to $650) to it. That would translate to just $1200 PER YEAR and thus, while you have investment plans in UK, I would advice you to spend on renovation.
I mean, the increase in rent would be just $1200 Per Year
so don't renovate as the added rent won't cover the shortfall.
Yes.. obviously not. You have shortfall of around 10k as you say, and you would add just 1200 to the rent, and that too, after getting the renovation done... The money does not deserve to be spent on this.
ok.. it's just you must have mistyped I would advice you to spend on renovation
I would NOT advice you to spend on renovation
I see you typing, friend. Are you there ?
I am here - waiting - sorry
Ok... So...I would NOT advice you to spend on renovation of your Australian Property
How much do you pay per month in Australia ?
that's fornightly sorry
Ok.. so 2500 Per Month
Total outgo = 2500*12 = 30000.
Is the 550$ per month or per fortnight ?
weekly but there is insurance, water fess, rates, management fees and it comes out to about 10K short
Ok.. I got it now. I was not getting how were you short of 10k. I get it now... Fine.
Let me now put this picture in other words.
Though you may not be making money on this property, but your ownership is being subsidized by your rent to the extent of 66%, i.e. almost two thirds. Am I correct ?
i.e. out of required out go of $30,000, you are just paying 10,000 as 20,000 is your income from rents.
Correct me If i am wrong.
Having said this...
Now let us presume that if you sell your property in UK, apart from what you get, you will be saving just 10000$/12 = $833 Aud a
and this would translate into savings of around 500 Pounds.
No, kindly tell me one thing.
Do you ever intend to return to Australia and use your property ?
its unknown at present - but we can't raise the loan deposit for a UK property without selling so I think we have to sell
That is what I am trying to convey.
See.. let me make it more elaborate.
so we have to sell
Presume scenario one -- that you do not want to sell.
then borrowing to the extent of property worth 600,000 Pounds, you should need to keep anywhere between 15-20% = 90,000 to 120,000 Pounds as deposits or down payment
This translates into approximately 135,000 to 181,200 Aud dollars and for this your 50k Aud Dollars deposit will fall too short for it.
Secondly, by using your 50k deposit to acquire, I believe you are reducing your cash reserve levels for contingency and emergency expenses at very dangerously low levels.
So, going by this, even if you convert into interest only mortgage, your short fall of 10k that you have in Australia may be taken care off but it will still NOT serve your current purpose of raising deposit for your UK Property.
Am I correct ? Correct me if I am wrong .
no thats right
Fine... so concentrating on converting into interest only mortgage too should not be done at this point, as it would be wastage of time and also not serve your current purpose.
we have to sell our property inorder to keep our safety net and purchase a new place.
So, in such a case, you have two options.
First -- Try and take out a interest only mortgage in UK if that is possible. I know in current scenario, it would be difficult to do that.
This will help you keep your Australian property
ok... Second would be sell your Australian property without any hesitation. Because, it will have more than one benefits.
First, you will get 225k Pounds as you say. All these money will NOT be used as deposit and you will have some extra money left to add to your 50k deposit. This will increase your safety net.
Secondly, the sell off would also save you $10k of deficit that you are paying. You can use that money in reducing your monthly out go here in the UK.
It is not question about being greedy or so, but it is about being financially prudent. You will not gain anything by reducing your cash levels to zero, and still continue to fund the deficit in the Australian property.
ok I understand.
Thanks for your help
You are most welcome. It was pleasure assisting you.
Feel free to revert for any queries. Rate this answer ONLY IF you are done with this and if this helps and satisfies you.
Graduated in law with Emphasis on Finance and have have been working in financial sector for over 8