Hi, (This post is long so bare with me…)
I live in sunny Perth WA. The house I currently live in is worh $150000, I currently owe $74000. The loan is principal and interest and the interest is 6.57%. I also own an 8month old 3 bedroom villa worh $215000 which is on an interest only loan owing $183000. The villa is negatively geared. I recieve $175 per week in rent and the loan repayments are around $231 per week. The tenant and property manager are excellent. After paying the property manager I pay about $300 per month to service the shortfall of the loan. (I recieve about $680 per month and the loan repay is about $1000)
My question is would I be better selling the villa and using the profit for a deposit on a positively geared property or should I keep the villa, which is in a good growth area and has excellent tenants and an excellent property manager?
Any advice would be highly appreciated. Thanks
BrentonHi Brendon,
Just a quick question, you said the villa is 8 months old, is that it’s actual life, or is that how long you have owned it????
Either way, my suggestion (and it is by no means the best option) is to hold the villa a while longer yet, for 2 main reasons:
1. The market is in a bit of a lull right now,
and you may not achieve the best possible
price for it. Especially as it is in a good
growth area.2. There is more value in holding such a property
in the longer term. Thus, I’d suggest you
wait a while.However, if you are really struggling with the repayments you may be better off to sell.
IMO selling a neg geared property, which has good CG potential to buy cheaper pos geared for the sake of saving some money, could be shooting yourself in the foot in the long term.
Nevertheless, please don’t take my word on it…seek proper financial guidance.
All the best,
Jo
Hi Globetrot,
Selling within 12 momths will make you liable for 100% CGT and as such any sale should only be considered after 12 months + 1 day have elapsed.
Have you maximised your cashflow?
Completed a section 15.15 claim (if appropriate) to reduce your pay period tax?
Had a QS report done to maximse your legal deductions?
Is your property at market rate?
Can it be upgraded (Eg A/C, garage door or similar) to increase rents?
Any costs that can be reduced?Ultimately the right decision for you will be determined by your purpose for buying the property in the first place – if those aims still stand in place then hang on.
I tend to agree with Monopoly keep it for the long haul and it should prove a winner.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by Derek:Hi Globetrot,
Selling within 12 momths will make you liable for 100% CGT and as such any sale should only be considered after 12 months + 1 day have elapsed.
Ofcourse, thank you sooooooo much Derek (I knew there was a very important point I was overlooking)!!! [blush2][blush2][blush2]
Brendon, if possible, please please do try your best to at least hold onto the villa for the 12 months….trust me, Capital Gains Tax hurts, and to cough up 100% would hurt much much more !!!! [crying][crying][crying]
Jo
The villa was bought brand new with all the trimmings off the plan, it was built by one of Perths best builders and is absolutely immaculate, in fact when it was inspected by both me and my agent we could find nothing wrong with it. The inital reason I bought it was actually through a mob called the Investors Club who are actually really good but they tend to always lean on the best case scenario and sometimes the truth is a little more expensive.
I suppose what I am getting at is that I have read Steve’s book and find that spending $300 per month on the mortgage of the property might be better spent on a positively geared property.
Am I right?
Keep the property for the immediate future for the reasons listed above, by all means get a valuation done on the IP after your 12 months and reavaluete your options then..
Your first Tax return should be healthy, definetly get QS in. Dont change tactics just because you want + geared IP’s, you’ve done a deal, evaluate it again after 12months i’d say, build your Equity in it and later look at diversifying your portfolio..
Investigate SiS’s ideas of Offset Gearing [exhappy]
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorHi Globetrot,
Property is not a get rich quick process and based on the numbers provided you have achieved gains of just over 17% in around 8 months.
You have also indicated that the property is in an area with good growth prospects and as such the potential compounding growth is likely to continue.
Which takes us back to your original question – for me hang on to it because the property is doing what you initially bought it to do.
If you are now chasing cashflow properties then you have approximately $35K in available equity depending on loan structure and serviceability issues with which you could supplement your income.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
So you guys suggest that I should keep the villa and possibly use the equity to fund a deposit for a +ve geared property?
Hi there,
I dont see any advantage to selling your villa in order to buy a positive prop.Have you researched what is available in terms of +ve geared properties, I think you may be disappointed.
We sold a great IP property about 8 years ago …. biggest mistake, havn’t sold any since.
Good luck
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