Agreed. I think you’ll find the majority of high rollers on this forum and in general buy and hold property.

The pay off from flipping a property can be huge but then you need to invest that cash somewhere else that will earn you more than you would have earned had you stayed in the current property. Plus you need to account for exit and re-entry costs.

Take a look at your reasons for selling and then you can determine the best course of action.

Have you considered keeping the unit, refinancing and purchasing another property? Talk to a mortgage broker about this, they will be able to provide specific guidance tailored to your situation.

• This reply was modified 9 years, 2 months ago by  Tom@SadhanaConstructions.

The general consensus from those in the know? Steer clear of rural.

Should you hang onto the property and wait for it to be in the black or sell now at a loss? Only you can decide that, but you’ve held the property for less than a year so unless you were in this to flip the property that’s a very quick turn around.

Can you afford current payments? If there are no tenants are you able to service the debt? If the infrastructure doesn’t go ahead how long until it does or something else happens? If the Coal Seam Gas industry doesn’t take off is there something else to substitute it? Are you better off cutting your losses now so that you can move onto another more lucrative deal?

There are lots, lots more questions to ask. It seems like you need to perform some due diligence on the area’s prospects over the next few years, determine what your goals are and narrow down your options about what you can do with your current property.

It’s important to remember though don’t make any emotional rash or hasty decisions. People who are in a rush rarely make money.

This is a very general question and it depends mostly on your situation and what you want. You need to determine what it is that you want first. Do you want a quick and easy buck, more bucks but not so easy or do you want a long term investment?

If you want a quick buck, sell now, pay the capital gains tax and walk away with your cash in hand.

If you want a higher return but more time, more investment and potential downside then develop and sell. You’ll need to qualify for the finance to build and service the progress payments for the duration.

If you want an easy long term investment then sit on the block as I assume you’ve been doing thus far and wait for the capital gains.

For greater long term gains develop, rent the places out and use the rental to service the debt, wait for capital gains.

This is general advice only, you’ll need to speak to an accountant or other professional for advice tailored to your situation.

It’s not the cheapest option but I suggest you get in touch with a project manager who deals with subdivisions. It will cost you a chunk, not sure how much, but potentially could save you a whole lot more or even save your deal if you get into strife.

Subdivisions are not the simplest projects for the uninitiated and having a good team on hand is imperative to your success. Councils being what they are there are a lot of hurdles. I’m not sure where you’re located but some of the bigger builders even offer this now such as Dale Alcock (I’m not sure if he’s only in Perth?).

And most banks will finance a 3 unit development as a residential deal.

Whoa, I wouldn’t worry too much about trying to figure out the exact nuts and bolts of what they’ve worked out. Take it at face value that your rents will probably increase over time as likely will the value of the property.

As the value of the property increases, sure your yield may decrease if your rent doesn’t keep pace. For simplicity sake, if you owe $100k in year 1 on a property valued at $100k and your rental income is $10k, your yield will be 10%. If in year 10 you still owe $100k (assuming interest only), the value of the property is $200k and your rent has increased to $30k, your yield will have increased to 15%. If however your rent has only increased to $15k, then yes your yield will have decreased to 7.5%

It’s like anything though, you can analyse it to death trying to micro manage the details but the guys who are making money are out there investing not worrying if their yield is exactly keeping pace with the uplift of value in their property. Sure they probably have a good understanding of yield and growth rates etc, but more than likely they learnt this on the fly through actually investing. You’ll always learn better from a hands on experience rather than analysing an article.

Jaxon hit the nail on the head. If you don’t have clear goals you could spend the next 10 years spinning your wheels and then you realise that you’re not where you want to be and BOOM your kids are teenagers and are costing you an arm and a leg.

There’s this book titled ‘Values-Based Financial Planning’ by Bill Bachrach. I’m not recommending that you read the book as it’s aimed at prepping clients for Financial Planning advice, but I WILL recommend that you check out his Financial Road Map that is an integral part of his process. It will definitely help you identify what you want and where you want to go. You should be able to get a copy on line easy enough.

Without generalising too much (although this is general advice only) the majority of property investors buy and hold with the exception of the renovate to sell crowd. I have no idea of percentages but this is generally what I come across.

The first thing you need to think about is what your goals are and what you hope to achieve by selling. You’ve already said that you want to take action in the next 6-12 months. This being the case do you simply want to upgrade your PPOR, buy a PPOR which you can then renovate to artificially increase the equity or would you prefer to stay in your current residence and buy an investment property. If you are seeking to upgrade your PPOR or want to renovate a new place have you considered converting your current PPOR into an investment property and buying a new PPOR? This is a very common strategy. If as you say you bought below market value and you have performed some cosmetic renos then it is entirely possible there is equity available for you to use as a deposit for your new PPOR.

If you decide selling is the best option for you right now then the entry and exit costs are the biggest concerns at this point. Real estate agents selling fees and stamp duty on your purchase are the biggest killers as CGT isn’t an issue for you. Is this outlay going to be offset by the gain you expect in the near term from purchasing the new property?

Of primary importance is where you think the market is going to go and how this sits with your goals and preferred investment strategy. Sure the risk of the market falling is very real, however will this fall by 5%, 10% or 20%? Given that exit and entry costs could be upwards of $30k for a $300k property (guessing as I don’t know the specifics) do you expect the market swing to be greater than this? You also have to factor in the hassle of selling and buying and the risk of storing cash in an account somewhere waiting for the “right” time to enter the market.

Something to consider when thinking about your goals and intended investment strategy is that for a buy and hold strategy, the entry point is very important, but more so is the exit point, i.e. for a true buy and hold there is no exit point. This would mean the down swings in the market “don’t” affect you as you just sit back and wait for the upswing OR (and this is the ideal) this is when you buy your next investment property. So timing the market will be less critical than if your strategy is strictly buy, improve and sell which will then be severely hampered if the market takes a dive.

• This reply was modified 9 years, 8 months ago by  Tom@SadhanaConstructions.

It sounds like you’re doing the maths wrong. When Steve says 10% of pre-tax earnings, I assume all he means is 10% of whatever comes in, so really it’s 10% of net income. You’re right that if you use the pre-tax figures to work out your after tax expenses you’ll be in the red :-(

Say for arguments sake you’re earning $100k using the 2014 tax rates (bearing in mind this is general advice only)

Gross Income = $100,000
Tax = $$24,947
Net Income = $75,053

Steve says that 10% of pre tax earnings go to charity: Pre-tax = $10k, After tax = $7,505
10% of pre tax earnings go to reducing debt: Pre-tax = $10k, After tax = $7,505
10% of pre tax earnings go to investing: Pre-tax = $10k, After tax = $7,505
70% of pre tax earnings for ‘guilt free’ living: Pre-tax = $70k, After tax = $52,538

I hope this helps

Hi and welcome Aaron, I’m new here too :-)

Note this is general advice only, you’ll need to engage a professional to receive advice tailored to your specific situation.

As with any professional take care of the charges they impose. Buyers agents may charge anywhere from $5k to upwards of $10k for an “average” priced property which you could potentially find yourself with a bit of due diligence and time simply invested on websites such as reiwa.com.au and this one. The benefit of course is that they will save you a LOT of time and present you with 2 or 3 options which will definitely fit your criteria or close to it. All you have to do then is make your selection.

If you go down the route of using a Financial Planner ensure that you choose one who specialises in property. Too many of them focus on shares and super, not something I’m overly fond of, nor others on this site I suggest given the targeted audience. Some are not able to give advice on property and some will push other investments on you. A Financial Planner experienced in property will definitely be able to point you in the right direction and will also have the necessary contacts to help you organise finance and a solid accountant to help maximise tax deductions etc.

Alternatively you can continue researching on your own and use this forum to it’s best potential and have others sense check your thoughts. Find the property that both you and your Mrs like and use a mortgage broker to help organise the finance.

Lastly, commissions paid to someone shouldn’t necessarily be a red flag to you saying “don’t take their advice they’re only in it for themselves”, the devil is in the detail. There is a big difference between property spruikers and sound advice with a disclosed commission.

Good luck and happy hunting!

• This reply was modified 9 years, 9 months ago by  Tom@SadhanaConstructions.
• This reply was modified 9 years, 9 months ago by  Tom@SadhanaConstructions.