We are considering to sell one of our investment properties. It is certified as heritage building, 2 bedroom apartments in Melbourne CBD. We went to 2 property agents/advisors, but they have different opinions. I would like to "hear" some advises here.
Bought in 2006, AUD397,500
Current mortgage is around AUD253,000
Repayment interest only at rate 8.77%, which is AUD1,874 monthly
Current rental is around AUD2,061 monthly, every year increase 5%
After management fees and misc, balance get from rental is AUD1,897 monthlyFollowing are the 2 property agents/advisors' opinion :
"No problem at all! The selling market at your area is around AUD430K to 450K." This property agent is an experienced person who always sells investment properties for local and foreigner. I am just thinking how long can he close this deal??!! I find that the capital growth of this unit is a bit low. Will it stay or even lower if I wait as U.S. economy has actually gone down.
"Why don't you hold this property? The rental market now is good." She is a newly property agent.
In the above convesations, what do you think? Should I sell or not? If I sell, definitely I can find something more portential in capital growth, maybe I can put downpayment of 2 more properties.
I would hold this property. Investment is for the long term and you should not be dissatisfied with the performance in just two years. After paying selling fees and CGT there will not be a lot of profit and I very much doubt if you could replace this unit with another for $397,500.
Quick profits come from greater risk and are of a more speculative nature. Are you confident enough to travel this path?
Jon
dosq,
My suggestion would be to retain this property.
From the figures you've put forward, this property appears to be positive cash flow – which is a good thing! I would expect you're putting the surplus cash onto the interest only loan as well.
One part I may be ignorant in here is your tax circumstances. But, the positive cash flow you're getting shouldn't be too much of a problem there as its not overly substantial.
Either way, I cannot help but feel that this is 'prime' property in 'prime' location – particularly when you consider the vacancy rates in Melbourne CBD. This might be a different issue if the property was in the outer Melbourne suburbs where vacancy rates still are low but it is difficult to obtain positive cash flow.
I also expect you have a depreciation schedule done on this property! If not, it may prove advantageous to get one as soon as possible. Look up Melbourne based quantity surveyors on the web.
Best of luck.
You've stated your management costs, but what about total expenses incl. bodycorp, water, council, insurance, sinking fund etc.
Surely these factors would alter the equation sigificantly?dosq
Should I stay or should I go. Lets have a look: You paid $397,500 (you did not say if this was inc. stamp) morgage 253000 your imput was 144,500 of you own cash. Lets not forget your opertunity costs, @ 8.4 T.D. at the bank this will get you $12,138 pa no risk before tax. Rent income 1,897 expences 1,874 a mega $23 positive before tax. If the hot water system gives you a bit of trouble and you need a plumber forget a positive rent income for the year. Fact is you are not making any rent income. If you want to keep it you have to look at a C.G. Mate dont forget you are loosing 12,138 pa thats 1,011.50 per month in bank intrest with no running costs. You have only had it 2 years think of the selling costs. Its inner city also. Dont panic sell but if a good offer was made take it, if not I dont think you can go too far wrong.Cheers
T…
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