Hi all,
We are in a bit of a jam, we own a 1 yr old property in Port Stephens ,our first investment where we owner built.(my husband is a builder) currently worth around 600k. between land costs and construction costs the property owes us 605k. My Father in law has 220k invested in the property as he bought the land and we covered the rest. At the moment the mortgage is nearly killing us. We are trying to sell but as it stands it looks like we are either going to break even or even make a small loss. If we break even my husband and I are pretty much starting from scratch with no deposit for another house. My plan was to get a personal loan for a 5% deposit and start again that way and do some reno's to get back on our feet. The other idea was to hang in there and my father inlaw was going to invest another 60k to help with repayments over the next 5 yrs (which he will want every cent back) given that the mortgage will be reduced over this time i have worked out that we will actually owe another 20k on the property at the end of 5 yrs. I am terrified at the prospect of the market not improving over this time and possibly being 20k worse off in 5 yrs.
Should we stay or should we cut our losses and move on?
Have you over capitalised on this one (due to inexperience, cost blow outs or emotional attachment)?
Is this a ppor or an IP?
Can you rent it out and move into something cheaper than the rent that you will be getting and pay the difference off the mortgage whilst taking advantage of depreciation?Is it feasible to rent out as fullyfurnished upmarket holiday accommodation during peak times?
What is the future for that part of Port Stephens?
It is a ppor . We didnt really overcapitalised but we overspent by borrowing against the house to pay the mortgage and pay for living expenses while we built which we now know was a big mistake (clock it up to inexperience). The house did of course cost more to build than we initially expected but the house in itself is worth more than the construction and land costs.
Our goal was to buy cheaper properties and renovate and sell and make money that way. But we are at a bit of a crossroads at the moment as whether to sell and start fresh or take the gamble that hopefully the property will be worth significantly more in 5 yrs. We have had advice from local realestate agents and valuers that the market up here will stay pretty much the same for the next 3-4 yrs and hopefully start going back up again after that. But given that we will owe another 20k in 5 yrs time instead of actually reducing the amount we owe, i am worried about doing this.
Renting it out is an option i guess as long as the father in law agrees to this, still not too sure off the benefits though can you explain a little more?
For example the mortgage is 700per week we can rent it out for about 400-450 per week and we can rent somewhere for around 350per week.
Were pretty new at this so bear with me!!! Thanks!!!Simplistically the rent would be added to your income and the property expenses both cash eg interest, rates, insurance and non-cash eg depreciation, borrowing expenses (over 5 years) would be deducted. This would reduce your taxable income
eg rent $20,000
interest $30,000
rates $2,000
depreciation $10,000loss $22,000
assuming you and your husband are on 30% marginal tax rate your tax would be reduced by $6600
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