Hi All ,
I brought a negitive geared house 10 months ago on the here say of a close relative with i am happy to say has appreciated very nicely.But since then i have read Steves book and numreous others, and im not sure whether i should hold or sell. It cost me 169000 although i borrowed the whole amount plus 15000 extra for new carpets painting , bank fees etc etc as i didnt want to use my own money. On todays market i would have no problem selling for 230000. Interest only loan and rental income 671`pm morgage repayments 814 pm. Now my question is do i put some lump payments on and refinance to make it positive geared although ive been anti to using my own money, or do i just keep on negitive gearing and rely on capital gains . My fear is im not going to get any more cap gain for at least 5 years and in that time my cap gain profit will be getting eatin up by the nev gearing. Ive got excellent tennants real clean freaks which is great but they want things all the time such as flyscreens ,securitie doors , new curtains, exhaust fans, washing machine taps, and if theres a slight drop of water in a tap they want it fixed . I have done everything they have asked for as it is enhancing my property but im still looking forward to the day when i get a full rent check. [
] Btw its managed by a re company as well so some checks are very miserable by the time i get it heh, so beaware sometimes its not so rosy as it seems .
This post just got away from me sorry only meant for a few lines ended up a book [8D]I have similar-ish quandry. Large % capital gain in last 12 months in an area that hasn’t seen much of that in the past – and may not in future. Do you bank it and run or not?
In your case, I would seriously consider taking the money and running as it is costing you serious money. This is on two conditions:
a) your research suggests that the capital gain has run its race for now;
b) you’ve held it for 12 months.In my case I’m going to hold for a while only because it’s not costing me anything.
Thanks rubbachook for you thoughts, To make my delema even more confusing whether to hold or flip is that the block is 1200 sqm so my original plan was to hold then put a house on the back of the block or even units . But to do this i have to wait for sewage to go thru which is happening in 2 years. The house which backs on to mine has come up for sale as well and its a 1300 sqm block with a house on for 215000 . Should i buy this with the thought of many units on the two blocks with 2 road access , but again its negitive geared and atleast a 2 year wait ,or do the 12 month capital gains and get out [?]
Hi Risky,
OK so you only paid $184000 (169k + 15k) but if you do sell it for $230,000 don’t think you are making a $46000 profit. After you deduct stuff such as the fee’s you paid to buy it, the fee’s you will pay to sell it and the capital gains tax you will have to pay, you might find you haven’t made much money at all.
I’m not saying don’t sell. Just making sure you understand the true profit (or loss) if you should do so.
Also you are not just looking at a monthly loss of $814-$671. You are not taking into account all the costs of ownership. It would really help if you did a CoCR analysis on this property to show you the “real” cost to you anually. I haven’t got all your figures but on a rough calculation your percentage loss is huge.
Other things to consider: Have you got a full time job, are you on a high tax bracket and can you easily afford the extra cost this of this property? If so you might want to just hold on to this for negative gearing and capital gain purposes. Use your big tax cheque refund at the end of the year and the equity to buy your next cash positive IP.
Do your sums comprehensively. Otherwise you are just guessing what is the best move.
Best of luck
Karan.Risky I don’t really know your personal situation so I cant really say sell or buy but as karen said you do have to weigh up all the other costs.
Generally prop should be a long term proposition but…..
Personally I might think about saving that lump of cash for a deposit on a pos cashflow ip, that way hopefully you may end up being close to neutral one day.
Josh
Risky I don’t really know your personal situation so I cant really say sell or buy but as karen said you do have to weigh up all the other costs.
Generally prop should be a long term proposition but…..
Personally I might think about saving that lump of cash for a deposit on a pos cashflow ip, that way hopefully you may end up being close to neutral one day.
Josh
Risky I don’t really know your personal situation so I cant really say sell or buy but as karen said you do have to weigh up all the other costs.
Generally prop should be a long term proposition but…..
Personally I might think about saving that lump of cash for a deposit on a pos cashflow ip, that way hopefully you may end up being close to neutral one day.
Josh
Thanks for the replys Karan and Josh, I am on a high tax bracket (47%)and i can afford to hold and negative gear, its jsut ive changed my way of thinking from neg to pos after actually trying to learn a little bit about this game [
]
I work in the offshore industry so i only work on average 7 months of the year which gives me good free time to shop around for ip’s. Ive got a meeting with my morgage broker on wednesday so hopefully he will be able to shed some light on my options.[^]Hi,
I’d sit tight and wait it out. It’s not losing all that much. And getting connected to the town sewer will be a great windfall. You’ve got decent tenants and the land is huge. Why not look at it a different way – $184K invested but, say, $90K of that was for the land, so $45K is really the investment in the half of the land you still intend to build on. So maybe leave that bit out of the calculations on the return for the tenanted part of the property. The guy who just bought our place is planning to knock down part of the house and build two more units on the back. And more power him if the council let him do it. But he says whilever he hasn’t built it’s going to be negatively geared. Even if all you do is wait for the sewer connection and get council approval for a house at the back without building it, it will be a much better invested.There’s a guy down our street (35km out from Melbourne) who built a house on the back of his section – a pretty little thing it is, like a two storey chalet. He’s just sold it for more than the agent valued the original house on the front, which is twice the size of the new one.
In 20 years time you are going to own two properties outright, the latter fully depreciable, all on the one section and have a great independent income, probably at least $2000 a month if not more. The rent will go up over time and the interest part of the mortgage down. One day it will be positively geared, even if you do nothing from now on in. Why help the real estate agents earn money? If you want another property, just use the existing one as part collateral. You don’t have to sell it. Relax! Your property sounds good.
KatHi risky,
i agree with kadabi1. 3 years ago we bought a house on a big block for 115k plus costs and repairs ended up 125k, it was rented for 185p/w, at the time it was costing me $60 p/w.
We built a new home on the back of the block for us to live in moved in july 03. the new home cost 230k.the original house in 3 years has gone to 225 p/w rent and the mortgage is at 115k, now it pays me $60 p/w, with capital gain its now worth 230k and our new home worth 450k. instead of 1 house worth 230k we now have 2 worth 680k.
you can’t buy a house under 250k on a big block now.
i know what i would be doing.
robo
coffs hbrWell done Robbo sounds like you hit the jackpot with that property , i hope mine goes as well as yours, in saying that i really cant see any reason why it wont as its in a sought after area .
And thx Kat , you have given me hope again [] Cant wait for sewage now so i can start the developments []
] Btw its managed by a re company as well so some checks are very miserable by the time i get it heh, so beaware sometimes its not so rosy as it seems .
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