Hi all, I am asking for some advice. I purchased a unit in Southbank, Melbourne off the plan about 2 years ago. Settlement is due at the end of this year. With the glut of appartments currently on, or coming on to the market rental return will not be so high, and capital appreciation will be low, or non existent in the short term. I have been given advice that this trend should change in the next 3/4 years once the oversupply flattens out, and there is once again demand.
My situation is that I should be able to manage my debt, even allowing for lower than expected rent, increasing interest rates, and indeed vacancy for a while. However this will obviously put me at a financial loss greater than I had planned on.
Should I try to sell sooner rather than later and cut my loses, or try to ride it through and hope things will turn around?
I know it is impossible to predict what will happen, but any advice would be great.
Hi
With the excess of properties currently on the market that you mention; how can you be sure you will get a tenant and how can you be sure that you will get the lower than expected rent that you mentioned?
I guess the question I am asking is that ‘How would you feel and would you be able to manange financially (and how long) with NO tenant in place? ie Are you 100% prepared for the absolute worse case senario and how long can you ride it out?
Dependant on the answer, this should guide you in making your keep/sell decision.
Cheers
David U
PS, how certain are you that someone would even buy it at anything other than a fire sale?
I would hold on. Don’t get too spooked about all this “glut” talk. Vacancy rates are still very low, and original rents quoted are always pumped slightly for finance purposes. This type of glut talk usually comes from people with other motives e.g. have you ever known an economist not to warn about the economy. All have vested interests.
I was warned off buying an inner Melb terrace in ’96. Doom and gloom talk about the future…increasing IR, jobs etc. I ignored it and turned $145K into $610K in 6 years.
As long as it is not an expensive unit e.g. penthouse, top floor etc, you should be OKSorry, if you are already concerned this article in the SMH may not help.
I don’t agree with the economist bagging above – this seems like simple supply and demand to me!!
There is only one way it will go in the short term and it wont be a longer wave than just three or four years I think.
http://www.smh.com.au/articles/2003/07/01/1056825394151.html
Return to your investment objectives and time horizon when you purchased. Did you buy for the long term? If so, ignore the short term volatility. As a long term investment I think Southbank is good.
However, if you purchased for a quick capital gain… it’s not going to happen. Cut your losses.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auI agree with Stuart, revisit your objectives and stick by them. Everyone has a different strategy and look at why you purchased in the first instance. It is easy to get caught up listening to everyone that has an opinion and then start to have self doubts. Those who have made money with real estate at some point were told ‘your mad’
Your next purchase will be different to this one. Every property in your portfolio serves a purpose. What is this one going to achieve for you?
Check with the lenders what is their LVR that they’re prepared to lend and is that the same as when you first purchased?
Good indicator.
Cheers Bobbie[
]Thanks for all the many (and varied) responses. Everything that has been said is stuff I have been weighing up in my mind already. To answer some questions, originally I was hoping for some quick capital gain (aren’t we all), but not necessarily to then sell it off for a profit, more to be able to use the equity for other investments. So I am now thinking that this short term plan is out the window. I was then, and still am of the belief that inner city is a good ‘long’ term investment. It’s just how long this term needs to be that is now open to question.
I feel comfortable that I will be able to afford the loss, all other things being equal. I feel comfortable that I will be able to absorb an interest rate rise, long term vacancy etc… However I am not one that likes throwing good money after bad if it is not going to turn around some time in the future.
So it’s looking like what I had probably already decided, hold on to it and wait to see what the future holds, and try to ignore all the newspaper articles!
Thanks again.
I live in Sthbank, the other day one of my neighbours auctioned for $249,000. It was a ground floor 2 bedroom.
Overall, i think Southbank is a good place to invest, as the prices will go up quicker than other parts of Melbourne..Can you get out of the contract?
I had a unit off the plan in Melbourne, prices hadn’t gone up like i expected and i probably paid too much for it in the first place. The construction had gone over the sunset clause, so I just cancelled the contract. I was just up for the price of the deposit bond, and some conveyancing costs.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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