i would be interested to hear from experienced people in relation to taking a differnt tactic due to the massive boom in the markets over the past few years.
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i have a ppor which i acquired for $200k in 97 and is now worth $400k. i currently owe $150k.
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I was thinking of selling now and pocketing the profits and then renting for 6 months to a year and wait for the property market bubble to really burst and then hopefully buy back into the market at a cheaper price is a better area, better house.
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Is this a viable option or would it be foolish to get out of the market and loose such an asset.
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BenHi Ben,
Sounds a little too speculative for my liking. Waiting for the property market to “really burst” in the next 6-12 months could be a costly exercise. You would incur selling costs of your home, plus buying costs in 12 months time (stamp duty, etc) which would erode any profit you may gain. There would have to be significant falls in real estate in the next year for you to win in this scenario. My feeling is (depending on which area you live, of course) the market will remain fairly flat in the short term but won’t drop massive amounts. Maybe you could do a heap of research, study this site, take your time and use the current equity you have to invest at some time in the future.
Good luck
Danny
Ben
What you’re talking about is property “trading” and is very much like share trading. Trading relies on you being able to “pick” the market and I agree with Danny, it’s very speculative.
As well, each time you sell, you deplete your asset base by the cost of the sale. E.g. Assuming all you own at present is your house. You have $250,000 net equity i.e. your net asset base is worth that. If you sell, you will incur agent’s commissions and legal costs, which could be about $10K. Now your asset base is $240K. When you buy again, you will incur stamp duty of say around $20,000. Now your asset base is down to $220,000. You’re going to have to make at least $30,000 on the next deal just to be back in same position you were before, before you even start to make a profit on the next one.
I wholeheartly agree with Ben that you’d be better to use the equity you have to invest in more property rather than speculate on where the market is headed. Even the “experts” can’t agree!
Some say up, some down, some say it will stay flat. I tend to think the correction has happened at it will back to some “normal” growth over the coming years – but, who knows!Good luck
Megan
Hi PDB,
There many many that figured out that it’s less cost to rent versus buying.
You’ll have approx $250K with no CGT.Great to start a pos portfolio.
Of course u could use the equity in your PPOR if u didn’t sell.
I believe that u need to assess the situation of your home in terms of appreciation / depreciation
and the market of your target areas. Factor in sell and purchase costs too. hope this helps.hrm
sounds like a big waste of money if you ask me! why don’t just utilise the sizeable equity in your ppor to start buying ip’s now. if you don’t like the area in which you are living then maybe time to sell up and go elsewhere. as far as predicting when the market will “really burst”, youre a better man than me! Its a buyers market now. Surely waiting till this imaginary bubble to burst is akin to watching the grass grow. Start looking for some good deals now. In closing, it would be foolish in my opinion to sell up your ppor for the reason of cashing in. doesn’t make sense….
possibly i didn’t explain myself right. i have a young family and when i acquried this property it was my first and the best i could afford. while my family was young i thought i could sell, wait and then buy back in to the market in 6 to 18 months. my thinking was that this may enable me to buy in a better area and into a better house. thinking that these areas may flatten out over this time and allow me to get into them at a better more affordable price.
BenBen,
Megan set out the numbers well.
If you had sold when prices peaked, it may be a valid strategy to look at buying later this year.
Right now you’d be selling in a market where prices have come off and you’re punting on them coming off alot more to justify the changeover costs of selling one property and buying another.
Of course, you may be living in a market like Perth where prices are still bouyant – you didn’t put in that part of the puzzle.
ScottTax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.auIf you think the market has peaked and will drop you can lock in your profit without selling and incurring sales expenses and CGT. Then incurring purchase costs when you wish to reenter the market.
This method only works if you plan to hold for the long term. So that any falls in value wont be realised.
Simply done. All you need to do is top up your loan to 80% (or higher if you wish) of the current valuation. Use an LOC or IO with offset (my preference). No need to draw the funds if you don’t need to so therefore repayments will not change.
You have effectively secured funds against todays valuation. If the val rises then top it up again. If it drops then do nothing. The lender wont reduce the loan on you.
This works very well for those who buy and hold. On a falling market you can lock in the available equity and use it to fund additional purchases from motivated vendors.
Nothing complex here folks – just a different way of looking at it for some.
Cheers,
Simon Macks
Residential and Commercial Finance 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.
Without knowing all the details about your situation, it’s best to hold on to what you can for as long as you can and buy against it another home and rent the first if able.
Roy H.
L.R.E.A., Dip FS (FP)
Guardian Property Specialists (GPS)
http://www.gpsnetwork.com.auOur thinking ig similar to you but we do not have so much equity as you, however our current philosophy is to hold our PPOR and rent it out , rent somewhere we want to live, wait for the market to raise a little and then sell. Looking at a 3 yr timeframe. Not a good idea to sell if you do not have to at this stage. My 2c worth.
Cheers
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