Heartbreak Motel

Dear Scott,

My husband and I are in our thirties, have two kids, have a $70,000-a-year household income, and owe $190,000 on our home ($240,000 value, we live in Tassie!), with $80,000 in an offset account. We now have an opportunity to invest in a business as 25 per cent owners in an accommodation/wedding venue. The asking price is $1.5 million-plus, with four partners putting in 25 per cent ($500,000 each) and an additional $500,000 for improvements. The profit from previous years is around $200,000 per annum, with future bookings into 2019. We are unsure if we should take this opportunity (as silent partners) or just continue to pay off our mortgage. Please help.

Tash and Simon

Hi guys,

This sounds like a real stinker of an idea.

In fact, let me count the whiffs:

Whiff one, you can’t afford it. You’re simply not earning enough to take on more debt. (Though that’s my opinion ... not the opinion of a bank that wants to flog you more debt.)

Whiff two, you’re getting into bed with not one, not two, but three partners!? You may start out wanting to be a silent partner, but trust me you’ll eventually have to raise your voice.

Whiff three, if the business has a downturn you may have to put your hand in your pockets, or reduce your dividends. And this is at a time when you’re still repaying your debt. And you can’t afford it in the first place.

Look guys, this venture smells worse than my son’s teething nappy (and the end result will be just as messy).

Life is difficult when you’re raising young kids, and living off one income. To quote Jon Bon Jovi, “You’ve got to hold on to what you’ve got”. Keep your life simple. Pay off your mortgage. Take time to smell the roses.

Scott