All, need some opinions on how to deal with my current situation
(not asking financial advise), just opinions…got 3 properties:
Amount Owing Current Valuation
Baulkham Hills Townhouse $265,000 $460,000
Auburn (2 bed unit) $192,000 $200,000
Chiswick (1 bed unit) $475,000 $380,000these 3 properties are cross collaterialised like this:
Baulkham Hills loan is secured by Baulkham Hills property
Auburn Loan is secured by Baulkham Hills + Auburn property
Chiswick Loan is secured by Baulkham Hills + Auburn + Chiswick property.am thinking to sell up everything & take $100,000 with me
any opinion ?
Paulusi,
I suppose the question is what are you trying to achieve, if your goal when you started investing in property was to generate $100 k, then congratulations you’ve achieved your goal, take your cash and relax in the knowledge that you’ve achieved what you wanted to achieve, however if your goal is to generate $1 million, then maybe you need to look at what the next step is.
The problem with many investors is that they do not start out with a goal or exit strategy, therefore its hard to quantify any decisions that are made along the investing track (i.e. like the one that you’re asking yourself now). I’d say you need to go back and evaluate what you want to achieve and then make a decision as to whether to sell out or not.
Also, have you considered the actual numbers with these properties with regards to CGT, interest that you’ve spent on the properties, stamp duty that you paid, deposits that you paid etc, perhaps the $100 grand that you think you’ve made is not actually $100,000. Recrunch your numbers, set your goals and then make your decision.
Good luck
D
Unless someone has a gun to your head, selling in that situation I think would be a very very bad idea. With $1m in gross value and Sydney in a slump it is the worst time to sell.
Markets tend to transfer money from the impatient to the patient. Don’t be impatient.
am in pretty much don’t know what to do now,
am thinking to get the $100K for my emergency fund, just in case.
you are right, that $100K is not all really profit, minus deposits & interests i have paid all along. the baulkham hills one was once a principal residence, so no CGT is payable on the profit, but on the other 2 properties i make a loss, so no CGT payable too.
is just that when we started, we both have dual income, now we got a child, i asked my wife to stop working to mind our child, better than sending to childcare. on single income now, so far coping with 3 mortgages repayments. when something happenned to my dad (got stroke last month), i did not have much emergency fund to help, this got me thinking, that what is the point of all the monies we have are tied up in property, which takes time to sell ?
unless this is my error from beginning, not having emergency fund (say at least $100K), then start thinking about property.
am still 29 y.o by the wayam an options trader on the US market, was thinking to sell up everything, and use $20K of the $100k as options trading capital.
more comments please…
Am I understanding you correctly that your goal is to have an emergency fund of 100k? You are willing to give up $100k/yr growth to achieve this goal?
If you have to sell, then I agree that now is not a very good time due to the slump. What about just selling one if you really have to – this will ease the monthly repayments at least.
Terryw
Discover Home Loans
Parramatta
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to shake-the-disease, thanks
how did you come up with $100k per year growth ?also to terry, i cannot just sell one, as you can see the properties are cross-collaterilised to each other, if i sell one i have to come up with the shortfall on the other property to make LVR stay at 80%, and i don’t have that much money to cover that. so either sell everything or don’t sell at all
Just relooking at your figures, you are pretty highly geared, but just because your properties are cross collateralised doesn’t mean you cannot sell one or two. You will just need to change the security on the remaining loans. But x-coll makes it messy.
Terryw
Discover Home Loans
Parramatta
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Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry, thanks for your comments.
yes am highly geared.i cannot just sell one, as you can see the properties are cross-collaterilised to each other, if i sell one i have to come up with CASH to COVER THE SHORTFALL on the other property to make LVR stay at 80%, and i don’t have that much money to cover that. so either sell everything or don’t sell at all
Just done a quick add up of your figures. Total valuation is $1,040K, total loans $932K which is a difference of $108K. Which also means your LVR is not 80% but just under 90%.
How conservative are your valuations? Even if you manage to get contracts at valuation, you are up for agents commission, which would be…what…$8,000+ per property? That leaves $84K.
What is your “gut feeling” about how the market where your properties are is heading? Remember there is every likelihood of another interest rate rise next week. But just remember that your crystal ball is just as good as anyone else’s – no-one knows for sure where the market is going.
The only practical suggestion I can make (if you decide to sell) is that you consider keeping the 2 bed unit at Auburn, and bring the loan to 80% which is $160,000. This should give you roughly $40K left over to consolidate your position and kick off again when you are able to. Or maybe the Chiswick property, but it may be a squeeze with one bedroom and possibly not affordable.
It is not all doom and gloom, you have certainly learned some lessons along the way and at 29 you have lots of years ahead of you to catch up. At worst (if you decide to sell everything) you will come our with approx $75K, not bad for someone your age.
Here’s something I have learned along the way – I call it the “sleep at night test”. If you are so worried about an investment that it keeps you awake at night worrying then it is not worth it. You should be focussing on the new little person in your life.
You have already absorbed all the buying costs, so explore every avenue to keep the properties before selling.
Can you and your wife juggle jobs so that someone is home at all times?
Can your wife work in the evening or at night?
Can you take on a second job?
Would any family members or close friends be able to help out, even one day a week so that your wife can do casual or part time work?$10K would be a more practical emergency fund, I don’t know many people, even well off ones, who would have $100K sitting waiting for an emergency.
Get professional advice, I am no expert. At the very least speak to your financial providor, they may have an idea you have not thought of.
Good luck!
Margthanks marg, you opened up a few dimensions in my mind.
even if i go to a financial advisor, i know typical phrase they would say ‘it all depends on what you actually want to do’ .
really appreciate the time you have taken to reply to my posts.ok, for my wife to juggle with work, i don’t think it is worth the penny to have my child sent to childcare or someone minding him, at best the mother & child bond is the best to have. i would not sacrifice anything for that, many people would prefer otherwise, but i am a strong believer in this. while other relatives are not handy too to be able to look after our child, so we donot have this option.
my valuation which i put up on this post, has been more than conservative. in reality, i hv checked around & sold market prices very ecently for the same unit, after selling all, i could still pocket $155K, then minus $25K for all commissions, left with $130k (which comprise of all my initial deposits, etc, etc, so not all profit).
you are right, not many people have $100K for emergency,
however when we think about it, $10K is not really enough for emergencies, yes we do have private health insurance, however all the what-ifs can just be coming along. not coming from a negative side here, but emergency is really ’emergency’, so having 10x$10K makes a lot of sense. of course, this could be sitting in a bank deposit at call, earning interest, but that is the idea of emergency cash. when my dad got health problem, i did not have much $ on my hand. lots have been learnt from this, my money all tied up in property, and i , as the only son, could not do much about it, not having enough emergency cash (i had only $15K), well, this could be that emergency cash level needed is different from person to person.then i was thinking to keep $110K for emergency fund, and use $20K to continue trade options in the US market.
that is all my plan. you are right, i still have a lot of years in front of me, however my focus is to retire early & start ‘living’ with my family.
i hv started investing quite late, i was 24 y.o at that time. hv certainly learnt alot from this venture.however, if i ended up selling up, i could be regretting this decision, when the market picks up again. you could see that all of my properties are negatively geared, if i sell up, and if i enter the property market again, i would certainly go for positive cashflow property, pay a buyer agent if have to. basically starting again with a clean slate.
any comments ?
From your posts I think that you have made up your mind that selling is the best option for you.
It really is a personal decision for you to make after weighing up what is most important from your own perspective.
Here’s an exercise:
Right now, I am going to tell you that you MUST sell your properties.
How do you feel?
Relieved? happy? glad that I said that?
or
Disappointed, sad, really want to keep the properties?
A psychologist I once worked with said that it really does not matter what decision you make, it is your reaction to that decision that tells you if you have made the correct choice.
Marg
Originally posted by paulusi:Terry, thanks for your comments.
yes am highly geared.i cannot just sell one, as you can see the properties are cross-collaterilised to each other, if i sell one i have to come up with CASH to COVER THE SHORTFALL on the other property to make LVR stay at 80%, and i don’t have that much money to cover that. so either sell everything or don’t sell at all
Don’t forget the LVR doesn’t have to be 80% or less, but can go up to 95%, but LMI will be payable – this may help you keep two if you really wanted to.
Terryw
Discover Home Loans
Parramatta
[email protected]
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Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
In my very limited experience with property I have learnt that once you sell it is very very hard to buy back in again. I would look at other options before you end up doing a fire sale. Besides if you go to a bank manager asking for a loan and tell them you have $80K as a deposit or three properties, they will probably prefer you had 3 properties.
I don’t know…just a thought.
CheersSimon
Heres how I think, your wealth is determined by the amount of debt you hold and not the total net assets. If your IPs are quality investments in the first place, the ability to control these assets will ultimately make you rich. The market in NSW is really depressed. Not a good time to sell at all. Are you sure you can get high $400s for your townhouse in Baulko? I know you can buy houses for that kind of money. With your options trading, $20k is not much at all starting capital and as you know, can burn that very quickly. I dropped over $5k on the SPI futures on this rally last couple of months and was only trading one contract! To me its just play money to get the juices up but if I really had to make money from trading, I know I’ll lose even more. Remember, not many fund managers/traders beat benchmark consistently in the long term. Most traders in banks survive on flow and client business. Proprietary trading is a whole different ball game. Good luck mate.
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