I have a one bedroom unit in Mosman, negatively geared when I purchased it 6 years ago and still so despite advance loan repayments. With more interest rate rises it will become even more negatively geared, the rent is as high as the market allows. Any ideas out there whether to hold (considering Sydney's rental shortage) or sell (considering rates will rise more and may send market down). Any thoughts welcome, Sydney is in an unusual spot due to the rental shortage which may keep the market on an even keel, or am I a fool to think this.
How much have you had in capital growth over the past 6 years? The rates wont be rising forever but the property prices will be. Especialy in Mosman. Whatever weekly repayments you've had over the past 6 six years, total them up and compare them against the capital growth you've had over these years. That way you will know how much profit you've made so far.
I would say it would be a good idea to hold on to your property as capital growth always outstrips the repayments for well located properties.
Besides, the more rate rises, the higher the rentals as most people wont be able to afford to a buy a house. So demand for rental properties will definitly go up.
Masih wrote:Besides, the more rate rises, the higher the rentals as most people wont be able to afford to a buy a house. So demand for rental properties will definitly go up.Thats exactly what I think too.
You will have more expenses but more income, balancing it out.
The difference is the stall(or slow down) of rising prices.
I will be getting into the market for the first time around the end of 2009(start of 2010) and I want to see rates go up and up and up, coz I know that rents will go up balancing the rate rises, and will stop prices going up between now and when I am ready to buy some property. The rising rents may not cover the rate rises, but they do help balance.Come on rates, i want more, higher, come on!!.
Lol, talk about doign things differently, high rates rock.
Chris.
A couple of things to consider – what are your personal circumstances? ie can you continue to afford the repayments with the increase in the interest rate? Why do you want to get out (is it becoming unaffordable)?
How many more rate rises can you bear?
Will there be any rental upside in the near future – is the unit already at market rent vs risk of vacancy and lost rent?
If you do decide to sell, will it be with vacant possession or with tenant in place?
As you have held the property for a number of years you will have to pay CGT albeit at a lower rate – so not all of the profit will go back into your pocket & off the mortgage.
What are you going to do with the net proceeds from the sale?DraconisV wrote:I will be getting into the market for the first time around the end of 2009(start of 2010) and I want to see rates go up and up and up, coz I know that rents will go up balancing the rate rises, and will stop prices going up between now and when I am ready to buy some property.I wouldnt bet on property prices stalling between now and 2010. Even though with all these recent rate rises we had, property market has been performing very well (Refer to chart below). You should buy when your financialy ready. Usualy it's not the TIMING of the market that matters but TIME IN the market that's most important. The longer you are in the market the more money you can potentialy make.
So if you're ready then go for it now.
Hye Masih,
Well, i'm not ready to buy into the market yet, I am just finishing my first year of 3 at university and my gf is doing a long tafe course, we are saving like mad and at the completion of my degree(end of 2009) we should be able to jump in at properties around 200-250, but i'm worrying that I won't be able to get anything good for that price(like close, i might have to move further west of sydney), I live in blacktown and prices here at the moment would be nice for that, but i'm looking at buying my IP in north paramatta but prices there are a bit more steep.I could buy my 1st IP here in blacktown, then after 12 months or so, with increased earnings of both of us and maybe some capital appreciation, i could buy another IP but this time in a better area(more cap growth).
Chris.
DraconisV wrote:Hye Masih,
Well, i'm not ready to buy into the market yet, I am just finishing my first year of 3 at university and my gf is doing a long tafe course, we are saving like mad and at the completion of my degree(end of 2009) we should be able to jump in at properties around 200-250, but i'm worrying that I won't be able to get anything good for that price(like close, i might have to move further west of sydney), I live in blacktown and prices here at the moment would be nice for that, but i'm looking at buying my IP in north paramatta but prices there are a bit more steep.I could buy my 1st IP here in blacktown, then after 12 months or so, with increased earnings of both of us and maybe some capital appreciation, i could buy another IP but this time in a better area(more cap growth).
Chris.
Hi Chris,
If you've saved up some deposit and you think prices might be too high by the time you finish uni, why dont you look for something Off-The Plan with long completion date…say 2 or 3 years? That way you can get in early in the market and dont have to worry about paying off a mortgage while still studying. Parramatta is a great area though I'm not sure if you can get anything in your price range for OTP. You'll be looking at 340k+ I guess.Quote:Hi Chris,
If you've saved up some deposit and you think prices might be too high by the time you finish uni, why dont you look for something Off-The Plan with long completion date…say 2 or 3 years? That way you can get in early in the market and dont have to worry about paying off a mortgage while still studying. Parramatta is a great area though I'm not sure if you can get anything in your price range for OTP. You'll be looking at 340k+ I guess.Well I have saved up around 5K this year (from part time work while studying), my girlfriend had 4K saved up but she bought an 8K car last month, so she will be paying that off for a while(shes studying to, part-time work).
Yea Masih, I have heard of these deposit bonds, where you pay a small amount and they pay the deposit then, later you pay the lot. But I have heard something about getting approval for these bonds, like you need to have a certain income(3 times the bond or something???)
Um, I have heard alot of bad publicity aimed at off-the-plan in these forums lately.
I am worried also that the (around) 25K that we will have saved up and my income( around 50K, hers 15K) will not be enough and we will have to forfeit the purchase.
I have been looking into west of newcastle, this area called kurri kurri, it has large land(nice for subdivision, cut into 2 and then build) and average prices are like 200K, and rents are around 200 per week.
I don't know, I have been researching lots of areas on real estate.com.au, blacktown, seven hills, another place south westo of newcastle called townsend(it looks good, but subdivisions are hard to come by there).
There is a thing I have with units, I want to build equity, subdivisions and builds are a way to go, and with renovating the existing house i can build equity quickly. large houses can do that, unit can't.
I'm in a real pickle of indecision and confusion…
Chris.
Chris,
Do you mean Wallsend on the west side of Newcaslte?
Tammy
tammy wrote:Chris,Do you mean Wallsend on the west side of Newcaslte?
Tammy
Yes, you are correct…. Is there anything wrong there???
Hi Zoe, if rate rise is your concern, have you considered fixing your loan?
DraconisV wrote:Masih wrote:Besides, the more rate rises, the higher the rentals as most people wont be able to afford to a buy a house. So demand for rental properties will definitly go up.Thats exactly what I think too.
You will have more expenses but more income, balancing it out.
The difference is the stall(or slow down) of rising prices.
I will be getting into the market for the first time around the end of 2009(start of 2010) and I want to see rates go up and up and up, coz I know that rents will go up balancing the rate rises, and will stop prices going up between now and when I am ready to buy some property. The rising rents may not cover the rate rises, but they do help balance.Come on rates, i want more, higher, come on!!.
Lol, talk about doign things differently, high rates rock.
Nice theory guys, and rather convenient. Conveniently optimistic. I can't see any evidence of high interest rates leading to high rents, but, hey, I've only done the analysis and you've thought it through, right?
Have you checked out whether the claims of a housing shortage have any statistical basis (aside from REIx spin)?
Cheers, F. [cowboy2]
Oops, I meant to say – house prices are driven by the willingness and ability of people to borrow enough money to pay the price. Rents are driven by wages alone. You can't get a mortgage for rental payments.
Cheers, F. [cowboy2]
foundation wrote:Oops, I meant to say – house prices are driven by the willingness and ability of people to borrow enough money to pay the price. Rents are driven by wages alone. You can't get a mortgage for rental payments.Cheers, F. [cowboy2]
Those who arent willing and dont have the ability to borrow then they have to rent. Everyone want to own their house provided they can afford to pay the mortgage. The more rates go up, the less the affordibility. Those who cant afford will rent. Is it wrong to use logic?
Besides wages are one of the contributing factors affecting rents just like interest rates but not the only factor.
This is survey they've done regards to housing shortage
http://www.news.com.au/business/story/0,23636,22744122-31037,00.htmlDraconisV wrote:Yea Masih, I have heard of these deposit bonds, where you pay a small amount and they pay the deposit then, later you pay the lot. But I have heard something about getting approval for these bonds, like you need to have a certain income(3 times the bond or something???)Um, I have heard alot of bad publicity aimed at off-the-plan in these forums lately.
I am worried also that the (around) 25K that we will have saved up and my income( around 50K, hers 15K) will not be enough and we will have to forfeit the purchase.
I'm not sure if they still give deposit bonds based on income. Usually people use deposit bonds if they have a certain amount of equity in their property….atleast 5 times I think.Yes you need to be very sure that you will be able to settle the property. If you're income isnt high enough then you could be in abit of trouble. I believe the banks are willing to lend you up to 5 or 6 times your income. Add and minus the rent and your other debts, expenses etc.
You're right OTP does get bad publicity. Most often from people who have never dealt with OTP properties. One of my teachers used to say that "humans are like sheep". They follow the crowd. If one says OTP is bad then the rest will too. That's not to say that OTP doesnt have any risks but it's important who you take your advice from. All types of investment strategies have their own risks and benefits. It's up to you what clicks with you.
Masih wrote:Those who arent willing and dont have the ability to borrow then they have to rent. Everyone want to own their house provided they can afford to pay the mortgage. The more rates go up, the less the affordibility. Those who cant afford will rent. Is it wrong to use logic?Besides wages are one of the contributing factors affecting rents just like interest rates but not the only factor.
Rents have historically tracked pretty well with wages and general inflation. I can't see any factor today that hasn't existed at some point in the past that might make the next few years unique in history.
Quote:This is survey they've done regards to housing shortage
http://www.news.com.au/business/story/0,23636,22744122-31037,00.htmlYep, thanks for that, but it's wrong and rubbish. See my post to you here:
https://www.propertyinvesting.com/forums/property-investing/general-property/4322711Cheers, F. [cowboy2]
Hi Chris,
There is nothing wrong with Wallsend, just don't let anyone tell you they need accomodation for uni students. we looked into that earlier this year and that shipped sailed a few years ago!
Hi all,
Thanks for all your input! I started doing a bit of reserach and talked to another property manager who manages several units in the same building, and it turns out mine is renting out for $30 per week less than what some of the other units are (in same condition inside). He told me he has a waiting list for tenants for one bedders in Mosman! I have decided to hold onto the property now as with rental increase it is affordable. I can afford negative gearing (job is secure) but I was just sick of the whole thing because of having nil growth (and negative growth), as is the case for a lot of Sydey property over the last 4 years or so. My loan is fixed for the next 10 months, by the time it becomes variable again the rents will have gone up again and should cover the increased costs. It has been hard going in Sydney for the last 5 years for landlords with a surplus of invetsment properties but now the situation is changing and at long last the rents are starting to go up to reflect the real value of property., as more and more investment properties get sold off. As for capital value, it is only now finally worth what I paid for it in 2002! The value dropped from 2003 onwards and was another reason to hold on, I did not want to make a capital loss as well. I am fortunate having bought in a good area, I know a lot of people whose properties still aren't worth what they bought them for in 2002/2003, and they are doing it hard especially due to the rates going up and up but being locked into making a loss if they sell and walk away.
Also please note rate rises do not result in rent increases!!!!Only if there is a market demand can you put up your rent to reflect the rate rise. If there is a glut of investment property around you might well find yourself lowering your rent and increasing your repayments. This has been pretty much my scenario, my unit has been renting well below what it was renting for in 2002 and is only now catching up again. But in that same time we have had 10(? I think) rate rises.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
