Hello people of knowledge!
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I am here to seek advice as my wife and I have NO IDEA what we should do. So here goes.
2003, panic, bought townhouse $400,000 borrowed $425000.
2006, owe $382,000 now being posted to Canberra.
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House on market but at best looking at $405-415,000 (listed with agent).
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Looking to rent in ACT for 12 months and then buy again. We have a solid income of between 190 – 200k p/a (dual income) and 1 baby with plans for another within 3 yrs.
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So in short. Should we cut our loses and sell? Should we rent it out, rent in Canberra and then buy again in a year or and use Sydney as investment or hold onto for a few yrs till market stabilises?
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Property is about 5km from Parramatta and is close to schools/shops so should rent easy but would expect $320 TO $350 max.
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Any help would be great. I am very security concious and never take risks. Very stressed at moment and basically feel like a bit of a looser. On the positive side new jobs in ACT and new lifestyle will be fantastic.
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Thanks alot
Dave
Sydney
[glum2]It depends what your goals are. Are your future goals capital gains or cashflow positive real estate.
Your income is not a problem and if you decide to rent it out could easily manage the shortfall involved.
We were in a similar situation 18 months ago and decided to hold and rent out (Perth) choosing to keep a foot in the market. It paid off (for us). We weren’t willing to take a loss at that stage and could afford the shortfall (negative gearing).
Our goals now have changed and mainly look for cashflow positive real estate.
We earn the same as you do but have set up a company to get the most out of our earnings.
It all depends on what your goals are but don’t get too strung out it’s all a learning curve.
Ros
I would sell and cut your loses. Sounds like it is not doing much for your health. I would suspect its going to be 3-4 years before you could come out square looking at todays market and based on what you borrowed.
Have you made a loss on this property? May be deductible on you income, so the loss may not be as big as first anticipated.Hey Dave,
Straight off the bat, your situation isn’t as bad as you make it out to be. Your combined incomes are solid as you say, and you can probably afford to hold on to the property quite easily, even if you move. After you move, your financial situation will be probably be very similar to now, right, given that rent paid and rent acquired will cancel each other out.
The fact that you’re going to owe ~$380,000 on an investment property that you’re renting out (if you decide to hold) will allow you to get heaps of money back from the taxman at the end of the financial year, given your impressive income. You probably don’t get that benefit now, because you live in your house, so its not an “investment”.
Also remember that if you cut your losses now, you’ll probably end up buying another property (as you suggest) in the next few years and you’re back to square one with debt – but you would have lost $25k or so.
Given the above, I’d hold on. In 3 or 4 years the market will start to pick up. It’s not a long time when you think about it (See, I’m trying to convince both you and me here, I’m in a similar situation
.And remember…..the sweet tastes sweeter after you’ve tasted the bitter!
Best of luck,
MkHi Dave,
You will love Canberra it’s a great place to live and the people are lovely [blush2]
Me personally would rent out your property in Sydney (this will build your equity over time) and rent in Canberra. Meanwhile get a depreciation schedule for Sydney IP(if not already done so). If you sold IP you would end up with diddly squat after capital gains and agent fees etc come out and virtually would have to start again from scratch[confused2].
The location sounds great and handy for tenants.
Good luck with the move.
Your decision at the end of the day, this is my view only.
Jenny
Jenny1
Rent it out.
Hi Dave
We are vendor financiers and in a lot of cases we’d suggest you on sell it using vendor finance. After looking at your situation I’d agree with most of the above postings, i.e. rent it and definitely get a depreciation schedule.
Good luck with the move.
Cheers, Paul
Paul & Karen Dobson
negative2positive
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Paul Dobson | Vendor Finance Institute
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Thanks sooooo much for everyones input. I feel alot better that renting it out is not a stupid thing to do when we still owe alot.
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I am just not into IP and I guess this is because I never thought I would have one/be in this position.
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We are going to live in Canberra for good. So if we rent Sydney out should we try and buy in A.C.T ASAP as market is a bit lower (at earliest 12 months away), or just relax and build equity in Sydney first before looking in Canberra?
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Other thing is who do I need to go and see to sort an IP out?
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Should Sydney be interest only loan?
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I have no idea? Anyone need a car fixed, may have a chance there!
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Thanks again it is really appreciated.
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DaveOh,
By the way what is a depreciation schedule?
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I think I need to do some fast reading!a schedule that gets smaller and smaller and smaller…..
have a look at http://www.depreciator.com.au and as a tip speak to Scott
ALSO get a valuation prior to renting out (may be needed for CGT later on)
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Online Positive Cashflow and Renovating CalculatorsHello Dave
To add my opinion [smiling] I would rent it out. You can afford the shortfall and now that you will be able to claim the interest on the loan as an expense this will become smaller after tax.
Good advise about a depreciation schedule.
As this townhouse was your PPOR (primary place of residence) before you started renting it out you can rent it out for up to 6 years and still not be up for capital gains tax when you sell as long as you don’t declare any other place as your PPOR.
If I were you I would first find a good real estate agent and then a good accountant who knows about property investing.
Good luck
ElkaHi Dave,
I think the real estate agent Elka mentioned would be a property manager – usually part of a real estate office’s team. If you ask on this forum, I’m sure someone will be able to recommend a good one in the area.
The depreciation schedule is basically a list of things the tax department recognises as costs. Things that go down in value while you own them, so that loss of value is considered a cost to the tax department. As others have said, http://www.depreciator.com.au is a great place to start.
Redwing’s recommendation to get a valuation is a great idea as well.
And yes, I agree with the others – talk to a good accountant who knows property investment. That’s the important part – make sure they know property investment. Talk to them about interest only vs P&I. Talk to them about your goals and fears. If they invest themselves and have several other clients who invest in property, they should be a great place for advice.
As for renting vs buying asap? Personally, I wouldn’t rush in and buy asap unless you know the market quite well already. I’d be looking at the market in Canberra and learning about it before I bought anything. But if you know it well, it really depends on your goals. Again, talk to your accountant.
Whatever happens – enjoy the shift. The lifestyle changes will be fantastic.
Craig.
Interested in Property Joint Ventures earning 15+% COCR? Email me for details.
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