My wife and I bought 2 properties via a 2 tier marketing company in QLD in the year 2000. Of course we paid above market value for them and feel ripped off They have been a drain on our cash flow. They are slowly appreciating in value to the point that they are now worth a little more than we paid for them. The rents are apperciating very slowly. We have also bought 2 holiday units at a seaside resort in 2001. They have doubled in value and the cash flow is good to the point that they cover the negative cash flow on the other properties with 6k to spare each year. However they do represent a lot of work as we manage them our selves, taking bookings, organising cleaning etc. Should we sell something? What?
You need to look at what your reasons for considering selling are. Possibly you think the Qld properties are still going to be slow to appreciate or the -ve cash flow is something you want to avoid or your seaside units are too much work for the return.
From a tax point of view from what you have written it looks like if you sold your Qld properties at this stage you would not be up for much capital gains tax if they are minimally above your purchase price whereas there could be a fair bit of tax with the others. May be you should talk to an accountant as there might be options to reduce CGT on the seaside units if they fall within the active asset issues for small business.
You could consider having the seaside ones managed by a PM, they are making money so why sell. The 6K spare should cover a PM and still leave you with some left over.
There seem to be 2 issues here
1 qld properties with -ve no effort
2 seaside properties with +ve with effort1) overpaid, with market only just catching up with purchase price.
Look at the market and asses whether there is going to be any CG in the near (2-4 years). If there is going to be any further capital gain does this exceed the loss on these properties. If not then I would consider selling these properties and put it down to a learning experience.
2) Seems like the only problem is the work required as you have made good CG and the income seems sufficient to offset the work that is required.
I would certainly look at keeping these as the selling process will simply erode the gain through costs. At a later point in time you can utilise the CG by drawing down and springboarding into more property that will show good returns and potential CG.
Remember in the end the real money from property is CG with the aim being to minimise costs whilst holding it.
As far as dealing with the work somebody has already suggested a PM arrangment.
Personaly I am currently drawing down excess equity in my properties and earning 5% over costs through a managed fund. This could be something yu could look into particularly if the seaside properties have double since purchase.
Cheers
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