hi everyone.
this is my fist post.I purchased a house in march/april this year.[biggrin] i purchased the property with the first home buyer’s grant, and yes i know i can’t rent it out etc for first 12mths. during this 12mth period i will be renovating house while i live there to reduce costs.
Purcahse price was 207,000, loan 192,500. my money down 13,000 rest covered by home byers grant (including legals ect). anyway at the end of the 12mth period (as long as reno’s complete)I am unsure if I should sell or rent the property.
currently mortgage payments are 1,271p/m. rent in the area is around 170-220p/w. which leaves me adding in to “buffer” mortgage.and i would have to neg gear. the house is in a good location (bus stop to city and major shops on street, primary school at the end of street)and was on the cheaper side (by at least 20000) for anything in it’s condition in that area.
i am really just interested in what people in this situation would do with the property. to get some ideas.
I believe the answer to your question will depend more or less on whether your property has good potential to appreciate. As you say this property will be negatively geared,as the yield appears to be no greater than about 5.5%, which doesn’t cover mortgage, plus there is other costs.
However if you believe this property has good potential to appreciate, not only will you make captial gains. But you will most probably be able to eventually increase rent to the extent that it will become cash flow positive.
Your other option is to sell after the period of 6 months (you only need to hold the property 6 months to qualify for FHOG). You may be able to make a capital gains on the property if you sell after this period, as you said that you did do some renovating. Here though you will need to factor in costs with selling (usually 1-3% of sales price) and of course you are exempt from CGT. This option is also preferable if you believe there are other opportunities out there with better cash flow and/or appreciation potential.
Hope this helps.
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