Hi everyone
I am in a state of indecision as you know i have a fully furnished Torren titled townhouse in the adelaide CBD (Sturt street).
I have a few concerns in regards to future trends in adelaide and the continuous building of apartments in the cbd.
There is alot of speculation in regards to
interest rates rising
price correction
years before recovery
What has made it harder for me is that i have spoken and contacted quite a number of people and i am getting mixed opinions.
The opinions are about equal
sell now while you are getting top prices
never ever sell hang in there.
Also what makes it difficult is that i see my particular property as a townhouse and not as a high rise apartment however some have said it doesnt matter the fact that it is in a complex still should be considered like an apartment.
i feel a tug of war so to speak
its wrong to sell (for many reasons)
its wrong to hold (for many reasons)If i sell i know that im up for costs and ill probably end up with about 50-60000 in the hand after CGT. On current market expectations.
If i hold i have some options i know some of which i dont have a whole lot of expereince with at this stage.
I could lease the townhouse to the accomodation company currently at the complex. This is one of those leases which is all there own way. This requires handing of over the furniture for one dollar then they take the furniture resonsability.
I could re-sign the current lease which has an option by mutual agreement this would have the same conditions. Keep the furniture my responsibility.
I could get a new lease drawn up by a soliciitor and negotiate around it.
I could go private rental get a property manager this costs with letting fees etc but may be able to get better rental return.
I could be the landlord and do it myself i have never done this so am a bit nervous on it bad would help if someone that is a landlord had some tips (what one needs to know etc) Are leases standard or does one have to have one made up.
Some facts are that whilst properties have doubled even tripled in price mine has gone up approx 35% in two and a half years!
this is in a major boom.Alot of accomdation is being built by way of apartments however not to the point of Melbourne and Sydney population growth for adelaide is a concern but the accomodation market for this type of accomodation is in demand from
students
corporates
conventions
tourists
overseas professionalsI guess because of how we started with a advisor and one stop shop we havent had alot of input and they have basically done what they wanted. This relationship is not as it was now.
So i am not sure how to progress this if i was to hold in what places to advertise.
Or just pay a PM to do it.
Or sell and pay down PPOR and take another direction in the real estate market. I have learnt a bit with forum and books over the last two years.
Any thoughts would be welcome what would some of you seasoned investors do.
I am still split.
kind regards
alfPS anyone had any dealings or heard of Cathy Pearce (Cathy Jane Developments) basically does renos has been successfull now selling videos how she did it.
Hey alf
I am one of the don’t sell unless you have to brigade i’m afraid.
If you are thinking of landlording, try Suzi Bilosh’s Aust Landlords Handbook (or some similar name).
Most townhouses are in complexes these days, so I wouldn’t think of it as an apartment. I think that’s where the statistics go, but in my opinion they are very separate. We have a townhouse (used to have 7 out of
in a complex that has 8 townhouses and 47 apartments. Ours is still definitely a townhouse, and can be differentiated in ads etc. on that fact.Also, if you have furniture, I hope you are depreciating it? You can get enormous tax benefits from furniture in a couple of years.
If the rent is covering costs then keep it. You could also borrow the extra equity that you have accumulated and look towards investing yourself. Go small to start. Dolf De Roos says that ‘Real Estate is very forgiving’. If you make a mistake (like we did, Purch Price $112K, value two years later – $45K, value now $119K, Yay we’re finally in front!!), it just sets you back, shouldn’t kill you off completely.
My two cents anyway
Cheers
MelHi Alf,
Melbear is exactly right……
“If the rent is covering costs then keep it.”[
]If not, then Piss it off.[}
]At this point in the cycle, you would have to believe, the potential for a decrease in the capital value of property is more than the potential for continuing increases. With interest rates almost CERTAIN to increase, any investment that is taking cash out of your pocket will only take out more.
The market is SO overheated that when rates do start to rise…as they undoubtedly will, there will be “For Sale” signs up everywhere, particularly in Sydney and Melbourne. The market is full of fools. The smart investor takes notice of what the fools are doing, and does the exact opposite. Despite the warnings coming loud and clear from the likes of the Governor of the reserve bank and the treasurer, still the masses are pouring money into investment property and are borrowing in some cases 100% + of the value, in a booming market……does that make sense to anyone? Smart investors can see an absolute disaster about to occur….if you can’t………have a look in the mirror……you are looking at one of the fools.
I have just sold my investment properties (The negatively geared ones)and am sitting in cash waiting for the blood letting to begin….Once the beast is on it’s knees and it’s throat torn open, I will be back in for the kill…
Dollars coming IN…..that’s what we want….
Ca$hking
That’s just really charming, cashking…
alf
I am in a similar situation. I decided to sell my apartment on the coast because I felt that it was fully valued and that I could free up the capital and buy some cheaper places elsewhere.Unlike cashking, I am not waiting for the “bloodletting”. I will just be doing my usual strategy of looking for cheaper properties that have capital gain potential or cash flow to pay themselves off.
Ultimately, alf, you’ll do what’s best for you, but I do think when interest raise even a quarter % (next month? the one after?) there will be a bit of panic and there may be many more properties like yours flooding onto the market. The more competition, the more of a buyers’ market it will be, leaving you to compete with everyone else. People will be lowering their prices to geth rid of properties and yours will reduce in value according with their lesser asking price.
If you think you have max value now, then it’s time to get out. A 10-20% drop will leave you with less cash to purchase other properties.
My rule is: “buy cheap and sell expensive”. That way I have more cheapies to buy!!
kay
C’mon Kay Henry, you are doing exactly what I am talking about: from your quote
“buy cheap and sell expensive”
Only my description is more colourful. I’m not trying to be charming, just factual. In any investment market, generally speaking, if someone makes money…..someone else has lost it!!
It’s a fact of life. I did’nt invent it. I just use it to my advantage….and I’m sure you will too, when the “Bloodletting” does begin. (If you were truthful with yourself)
Cheers
Ca$hking[
]Actually, no cashking. I *am* truthful with myself… and i am not into bloodletting. I bought my property 8 years ago- at the bottom of the market. It has since made a considerable capital gain. I have not raised the rents in it since I bought it as I wanted to do everything ethically- I still do. I am now selling it- still at the bottom of the market. But it means I can afford 3 properties in much cheaper places in the country for the price I am getting for it. There is nothing exploitative about what I am doing. I bought a cheap place and 8 years later it grew in value. Now i can buy 3 more cheap places- in smaller towns- that’s hardly bloodletting…
Every decision I have made, I have made ethically. If i was told a pensioner was selling her place because she didn’t have the money to keep it, I would at least give her full asking price, and not use her disadvantage against her. It’s just who i am- it’s not that i am just lying to myself…
[
]kay
Chill out Kay Henry. My words are used as a figure of speech. I’m not a tiger in the jungle waiting to pounce on a disadvantaged antelope or something. Your strategy is to get out at the top of the market, so you can buy back into the market on cheaper properties elsewhere…..I AM DOING THE SAME THING!!!!!It’s just that my timing will be different to yours!!!
It’s a fact that a lot of people will lose a bloody lot of money when the market corrects itself. It’s not my fault, or yours, it’s just a fact. If I or you happen to buy a property from one of these people that can no longer afford to hold it, then so be it. If the term bloodletting (to describe this situation)is offensive to you, that’s your problem. There is no way to put a nice spin on people losing money. But that should’nt stop anyone from picking up a bargain that someone else can no longer afford.
That’s all, simple really!!
Ca$hking[]G’day Alf…
I can’t ignore your question Alf …but you knew that I wouldn’t.
I don’t see that it is a problem…[?]it should be sold as it has not been a good investment. Consider how it has performed in comparison with your own home.
While the Investment went up a lousy 15% your home increased by 120%. My advice is to sell it in Todays Market….and sit on the sidelines until this market comes off the boil and even then wait it out for a year or two.
A bit like “shorting” the R/E Market…Sell Today and Buy again LATER.
One question: “If you didn’t own it, would you buy it today”?
That’s why you should be selling now.C’mon Guys and Gals, don’t be shy [
]
…Alf needs much more input…you would be doing him a favour if he was to get a good cross section of views.See you later mate
Bill
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]Hi All
I really appreciate your responses and you validation of why you take a certain position sell or hold.
Melbear
Yes i am depreciating the furniture if it wasn’t for the depreciation it would be very negative instead of slightly negative.The landlording book sounds interesting thanks.
The current rent is not covering costs.Without out depreciation it would cost me approx 5500 a year. with depreciation my cost is approx 1500 a year at this stage on current rent.
Cashking
Yes i know what you are saying if it covers costs keep it as i have indicated to Melbear it does not. However having said that on the private rental market it would fetch more rent which could make it pay for itself.
I would have to do it myself though to make it viable as with a PM the end result would roughly be the same in dollar terms. with letting fees advertising and 8-10%fees.Kay Henry
Yes i feel that now is the top of the current market but as others have pontificated to me the cost of selling is not worth it plus CGT. When one has a close to positive cashflow property.
Some have said that todays top prices are tomorrows bottom prices so their is a real mix of opinion.Bill from Oz
Yes i know your sentiments and reasons. You know that at times it is not always easy especially when one gets an even opinion one way or the other.The answer i feel maybe simple as if i hold what to i stand to gain or lose.
If i sell what to i stand to gain or lose.
Some seasoned investors have suggested to me that the fundamentals of property investing is to hold and never sell. Property will always climb in the long term.
If the value is say 300000 and returns say 7%CG a year average that is 21000 a year. Which is lost if one sells.
The key maybe to be able to manage the ride whichever way it goes.
So to make it work if i hold is to manage it myself at an increased rent.
If the above cant be achieved then i would be in agreeance that sell maybe the answer.
thanks to all always open to others views.
regards
alfAlf,
HELP !!
I am experiencing the same indecision. I’m a bastard for procrastination. The what ifs are never-ending. One thing I have learnt, when I don’t know what to do I do nothing. Then the market makes it’s decision for me.
As you said Kay “If you think you have max value, then it’s time to get out”. Yet .. Mel’s proven approach is one of long term thinking.
Bill.. you’re a bugger for making me think. No, I would not buy my own house today, but yep I’d short sell it. Question is, where does this leave me for borrowing next time?CashKing .. maaaate .. I just love your succint, colourful and “to the point” approach. Your thoughts are what I needed to hear. You have certainly made me think again. Thanks for your reply here. I think I’m acquiring a taste for blood!
Rather than start a new thread, would those of you have responded here be happy to reiterate your thoughts on my simple dilemma? Kay, I like your point about selling up to buy other cheap properties in time. Other opportunities apart from direct property investing are also an option.
Agent suggests I would realise $300K. I owe $220K. Bank valuation for debt consolidation came in at $255K. So, I know it’s inbetween the two.
Prediction .. rates will increase by 0.25% next quarter, followed by another 0.25% – 0.5% within say 6 months.
A/ Stay as is .. no car payments nor credit card debt due to consolidation. Increased mortgage payments (PPOR)with a levelling off in CG at best.
B/ Sell .. Up to $80K cash in hand (call it $50K at worst), no more car payments, no credit card debt, have to rent, cash at ready for opportunity.
Last question .. My PPOR is in Canberra, as I bought in January, am I subject to CG tax if I sell prior to 12 months ownership?
Thanks for those of you who have stayed with me on is. I do need some direction, as simple as my dilemma may sound.
Thanks for your valued time.
Kind regards, Phil
G’day Alf,Luckyphil,Mel,Cashking and Kay…
I agree with Cashking re a 20/25% fall across the board. Perhaps with the exception of Blue Ribbon Waterfront. Some areas, Regional/Country towns may very well fall much more.
However, Alf and Phil…Do not sell your family home….cost of buying/selling again is my reason.And it IS your home…not an investment. Of course over a number of years it will prove to have be more than a roof over your head.
But Alf…when you have an investment that only increased in value by 15% in a Big Boom, what in hell is it going to do in a property slump/slide? That’s why I have no hesitation in suggesting in the strongest of terms to Sell Now.
Compare it’s pitifull increase with the huge gain in your own home.A loss is a loss even on paper if you hold. I am not emotionally involved in your Investment Alf…that’s why the solution is as clear as day.
If you divide the 15% by the time held…it is a liability Not an anvestment. By the way did the MCP arrive okay?An example is in the share market…traders live in hope that the market will “work itself out”.
A little while later they then see what should have been obvious weeks/months earlier..EMOTIONS cloud our judgement. It will increase in value, but NOT ast 7%pa..it’s already proved that Alf, but the other opportunities that will surface in time make that investment an easy descission…….when it’s not my property.Cheers
Bill….without emotion
ps.LuckyPhil…to avoid CG you must live/retain home for 12 months and a day. But don’t sell nyway.Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]Bill,
Thanks mate but I’m still confused. My home is where I hang my hat, if I owned a hat. I have no emotional attachment to bricks.
I understand the long term thought as per Mel’s approach. What of having cash on hand to grab an opportunity ? I don’t plan on living here forever. What’s the diff in selling whether it be IP or PPOR, given your point on 12 months and 1 day ?
Regards, Phil
Hi LuckyPhil
My understanding is that you do not have to have lived in your PPOR for more than 12 months. It is CGT exempt even after a short time.
I have read this on a thread by the seasoned investors. They quoted the taxation rules etc. So might pay to check with the ATO apparantly there is no time stipulated.
regards
alfHi Alf
You wrote that you have done your sum. I assume it involves : calculate your capital gain, take away agent/solicitor .. fees, take away the depreciation allowances you have been claiming so far. Add this amount to your taxable income. From here you would know how much capital gain tax you have to pay and how much Net gain you have made for this property. I notice that in general the value of Serviced properties (or in the same complex with the serviced IPs) hasn¡¦t been increased as much as the others so I assume it won¡¦t come down as much when interest rate increases. It¡¦s not too bad that your IP value has been increased by 35% in 2.5 years.
Assuming the current market value of your IP is approx. 300K, -10K (Agent fee), -1.5K (Solicitor/bank fees), -20K (CGT) : You have 268.5K to buy a new IP.
Assuming you buy a similar property in a year time when the price has dropped by 20% from 300K = 240K, +8k (stamp duty), +2K (solicitor/bank fees). You need 250K !!! „³ You gain 18.5K : not much of a gain, why sale?
It¡¦s just another way to look at. I hope my maths is still ok.
Regards
Huey
G’day Phil…
I realise that mortgage payments are made with after tax dollars….however consider 3 things:
1) Forced savings…bit like your super.
2) A Roof over your head
3) Tax free CG….over time.
4) Yeah, Im Irish, just another thought… You have security of tenure, and renting ain’t much fun, ask around.
(5) Can’t count either…Finance your investment RR another way with OPM. You contribute your skills in exchange for equity.
That’s my 2 Bobs worth.
Bill
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]anecdotal evidence only, but how many people have I heard say ‘we owned a property in 19XX and i wish we’d held on to it, because it would be worth a fortune now!’ ?
– almost everyone that ever sold!!
I must say i agree with the title of the thread except to add ‘almost’ before ‘never sell’. If someone offers you stupid money, you could always take it. Although that might give you a clue that someone might offer you super-stupid money in a few years. Your choice. If you think we are at the top of the market, and you don’t want to sell, why not get the house revalued right now and take out a LOC that you can use to buy property when you see a slammin’ deal.
I have bought and sold properties in the past. Looking back I realise that I would be in a much stronger position had I held.
I have now made a conscious decision as part of my strategy not to sell any properties. The exception to this would be multi dwelling developments however I would hope to retain one from a project such as this.
I think the difference is that as I am a little more experienced and older I now have an ability to see a longer term picture rather than snatching at a short term gain.
I think Minimogul is spot on and his ideas match my feelings on this.
But as always many people have many strategies and there isn’t any one route to take on this path to wealth!
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks to all for your advice,
Makes sense to get a new valuation and LOC if 80% is achievable.
Yep, wish I still had my other houses. I don’t even want to know what they might be worth today.
Regards, Phil
People,
We have to very careful with CG tax, it can sneak up on you in a variety of ways. A couple of examples:
1. If you own a house for 10 years and live in it for the first 5 and then rent it out for the second 5 you are subject to CG tax for the second 5 (there are some ways around this if you still declare this your primary residence if overseas).
2. If you take in a tenant/boarder then a % of the CG will be liable for tax.
CGT is one of the more complex and convoluted taxes out there and well worth getting professional advice on.
Regards,
Shane
I think the “buy and hold” formula is a good one, however…
What about “buy in doom sell in boom”? I bought my place 8 years ago and had i tried to sell it 4 years ago, i would not have achieved more than asking price. I think the market is peaked or peaking. I think my property is fully valued- at this point in time. It depends too on the property. If you buy a property *really* cheaply- before RE became so “fashionable”, and then you make a heap of money on it, it seems to make sense to get out of it. It seems sensible to realise profit, rather than wait for the next boom.
Of course, I only have two properties :o) I very much want more!! I think if one buys and holds for 7-8 years or more at the cheaper end of the market, it pretty much pays for itself. If you buy cheap, and then some weird market forces tells you it is worth a fortune- take the fortune and run! (run off and buy some more).
kay
in a complex that has 8 townhouses and 47 apartments. Ours is still definitely a townhouse, and can be differentiated in ads etc. on that fact.
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That’s why you should be selling now.
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