I have an unusual problem. Any suggestions much appreciated. IP has a tenant in, that has been there for 13 years. He has no intentions of going anywhere.($155 wk) He is the absolute perfect tenant. Unfortunately he is a horder. He keeps the unit in very clean condition, but is totally cluttered with his belongings. From Star Trek DVDs, to teddy bears to magazines. He keeps everything, but neatly stacked and stored. (You can bearly see any of the walls)However, this makes it very difficult to sell the unit, (on the market now) let alone do any type of renovations.
My question. Should I up the rent to $170 take the risk of him moving out, then can spend $5k renovating. (should get an extra $15-20K on sale) ??? If he stays, I get more rent and will be positively geared, if he moves I get to reno and make more capital gain. Im not in a position where I “have” to sell, butr would like to. (I just want a new car) [suave] Have had unit for 3 years and it has X2 in value
Should I try ask him to move out for 1 week to do renos? If so, should I pay for him to stay elsewhere, or is this the trade off the get better place (repainting whole unit, new carpet etc)
Do you REALLY NEED a new car?
If you don’t need to sell the unit, don’t sell it, especially if you use the money for a new car. You would be giving up potentially thousands of dollars in capital gain and rent for something that will lose you thousands of dollars over the same period.
If you NEED a new car (I’d chose a second hand car) I’d definitely leave this tenant in, but raise the rent to it’s market value. If he has been there for 13 years then getting it up to market value may be too big for one jump. Possibly raise it for six months and then raise it again.
If he has a lot of “stuff” he will probably not want to move it for a small rent rise, especially if he knows he has been paying less than market value for a while.
If he goes, by all means do the renovation, but then rent it for even more and the extra rent goes towards a car loan.
Better to have him in there (with more rent) than have him move and have to renovate while it is empty, especially if he is a good tenant.
We’ve (reluctantly) sold IPs to clear debt and improve cash flow as our children have grown and living expenses have increased, but we would NEVER sell an IP to buy a car.
Just my thoughts, Wylie.
Hi stuck at two,
I don’t see that you have a problem. I beleave you should put your rent up. I have several town houses and it bothers me when I’m getting $180 a week rent and the investor next door is only charging $155. This is a common occurrence in Logan. The other point you should concider is that when you addvertise to sell you will get more responce if your rent is $180 instead of $155. I don’t think long term tenants are good especially when rents are on the increase.Thanks for the responses. Agree on the new car/2nd hand thing. Did I mention the missus is up the duff and her 92 Holden Nova doesnt have air co etc. Ill give her my car, and I get the newby/2nd hand car.
Also need to reduce payments on PPoR as wont have second income.
Your right, think im in win/win situation here. (Was my 1st IP so little bit in love with it)
Rent at present is market value for area. So I would only increase rent in order to get in and do renos. If he stays at higher rent, then re-assess situation later down trackHi again, stuck on two,
I want to tell you what i did when I was in my late teens.
I bought a fantastic block of land in Rosebud Victoria. I hadn’t owned the land long when the Houseing Commission offered to buy it from me for almost double what I had paid. Well it was to tempting, so I agreed.I ended up buying a near new car with the money, which was $9,000 back then. Anyhow I kept the car for about Fifteen and sold it to the Wreckers, full of rust for $450.
At the time of selling my car the land had increased from $13,500 to $90,000 and today it would be worth about $200,000 more than 20 years later. At the time I thought borrowing to buy a car was bad, but now I realise that selling a quality asset is even worse.Think long and hard about selling to bye a car, your family will thank you for it.
Cheers.yeah, I certainly get your point… its just a tough decision, i know i make it sound like Im selling to buy a car, but the main reasons to sell are (in order)
1) reduce payments on PPoR
2) ensure wife and baby have safe motor vehicle
3) Make good CAp Gain (and the vehicle is a gift for the hard work i had to do to make to CG)
Note I owned the preoperties before getting hitched. I want something to show for it!!
This property is never going to make me a fortune except for the Cap growth so i feel now is a good a time as any to cash in. I know Im making the right decision here, and like I said earlier, I think Im in a win/win situation. But hey, thanks fo rthe feedback, sometimes it others opinions that allow you to ensure your making the best decision for youStuck at two
You dont have to justify anything. Situations change, so you must too. Why dont you write down all the for and against points and be very honest. I think that will give you your answers.
ecattAnother thought – why don’t you refinance and use the equity to buy the new car and then you still get to keep the property.
Does this mean you will have to change your name to ‘stuck-at-one with one on the way’??
If you sell the property consider the effect this will have on Child endowement, Parenting payment pension and Child care benefits.
Also capital gains tax implications need to be considered.Yes, this means be back to one. But I will have the opportunity to buy when the right propertieS arise. I have a unconditional loan approved as is (and have had for 3 months) and still cant find a property worth my time.
Interesting comments on the child welfare/payments thing. Anyone have an experience in this?? In know you get $3119 payment for chiuld birth regardless of assets, but does this affect any thing else???
I agree with SS2306. Refinance while you both are working – this will give you access to your capital growth (read cash) to: buy the car, help make up for the loss of income/xtra living expenses, unexpected family expenses, contributions toward monthly PPoR repayments, pay for monthly interest bill for above.
You could do the above and keep the IP or sell it and pay the taxman (and his endless list of recipients). I suppose you’ve factored in the baby bonus.
And, yes, put the rent up – this is just good business.
Remember, this will be the poorest period of your life – not a bad situation if you have access to cash.
Anyone have suggestions how to structure a refinance & PPoR loan to achieve the above? There is taxable and non-taxable interest to consider.
Good luck with the new addition.
I’d definately refinance, then buy a 2nd hand car. I’d up the rent in 2 stages back to full market rent, and if the tenent moves out, so be it. You’ll find another one. Also, if he moves out, that will give u the opportunity to jazz it up a lil. Maybe that will mean higher rent again. No problem.[chill]
Cabo Wabo
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