Hi all
Got a bit of a dilemma on my hands here and need some advice. We had a new home built and moved in last July.We are just finishing off the garden and it looks like I will be transferring up to Perth sometime this year. My dilemma is do I sell the house or keep it and rent it out?
Current Mort $339k sale price about 385k to 395k and I have about 25k savings. On my salary I can go up to about 450k at a push. The company will pay all legal fees and stamp duty if I have to buy and sell.
If I keep the house I don’t think I can buy another yet as I don’t have the equity or we end up with very small house and with 2 kids and pets thats not much use. If I sell I will be able to buy a half decent house in Perth but the markets pretty poor around Bunbury sales appear slow so we may loose there.
My hope was to keep it rent it out and buy another house in Perth using the company to pay all fees. Not keen to rent again in Perth as some rents are almost the same as mortgages. Further more I think I will be very negatively geared with the mortgage as rent is likely to be about $380 which makes me think I should sell?
Your thoughts would be very much appreciated!
You have to think about what you want and what you can afford.
Firstly, if the company is paying all your fees that is a huge blessing!!! How often does an offer like that come around?
From what you have said it looks like you have about $40k in equity and $25 in savings. That is a total of $65k
If you can only borrow $450k then you might not be able to keep both. And you also have to ask yourself whether you can afford repayments on both properties?
Buying to invest and buying to live are two completely different things. You bought your first home to live in, but that doesn’t mean it is a good investment.
Have a think about selling and buying a new home and then maybe using any extra money left over to buy an investment property. Maybe a cheaper one that has a better cash flow situation??? Just an idea to think about. That way you may be able to get a home that is big enough for you and still have an investment???
Ryan McLean | On Property
http://onproperty.com.au
Email MeWould they pay the agents fees?
My general advice to people is even if the area you purchased in is going to sub perform after all the transaction costs you are often better to keep. FYI:
Sale Price: $385,000
Legal’s Buy and Sell: ($3500)
Agent's Fee: ($10,000)
Marketing: ($1000)
Duties on $450k: ($16,000)
Loan Swap Costs: ($1000)After Costs: $353,500
Equity: $14,500 + 25,000 = $39,500This means that over about 7 years you would need and extra 2-3% capital gains to simply break even! However, since your company is willing to pay all you’re transaction costs selling may be a viable option.
This is opinion and not investment advice:The South West especially Bunbury is oversupplied with stock. It is a little different to Perth in the sense that it has large land subdivisions on the outer areas of Bunbury. Now even in peak time it’s about 5 to 10min drive to the Bunbury centre as opposed to Perth where all new green fill areas are 30 to 45min out of the city in peak time. Now for a person to drive an extra 5min as opposed to 45min into the city is not a "deterring factor" when buying a property in Bunbury. Therefore, you will always be competing with a vast amount of stock for a long period of time (until this supply drops – but think how much land there is to be developed).
Comparatively, with $450,000 you could buy and older property 10 to 15 min out of the Perth CBD in suburbs with limited supply. From my clients experience these properties have tended to appreciate faster then regional properties, with of course the downside that they aren't new and flash.
Hi specialone,
I totally agree with Kent. Who needs new and flash? You can always renovate a house. But you can’t renovate a location.
Specialone, could you ask your company if they’d give you free housing instead?
Free company rental is a massive boost to your ability to retain your asset and “save” for another to add to the portfolio. If the ink hasn’t dried, maybe this is something to look into?
Just a thought.
Angel
Thanks for the replies really appreciate your comments.
Just to answer some of your queries – Kent, they will pay 50% of the agents fees and I will be based in the Northern subs so anywhere around Joondalup will good. I agree with your don't sell advice but this might be one that I sell if they are paying, however I will watch the market carefully to see how Bunbury is doing and get some local advice before I make a decision.
Angel – they dont have any properties to rent so unfortunately thats a no go.
We have couple of areas in mind Kinross and tapping and are keeping our option open although we do prefer ryans idea of buying new it makes financial sense to consider an older property as the company pay the stamp duty so no paying two mortgages whilst they build.
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