I'm after anyone's thoughts/opinions on my current situation.
I currently have an IP in Yamanto, renting at $300pw. The house is 2yrs old and the mortgage on the house is around $305000 at 8.69% – you do the math (it's not great….). It is a 4br 2bath on 900m. I am renting privately so don't have the costs of paying a property manager and the tenant is excellent. This was my PPOR until I moved for work in December last year. Whilst I believe the house should sell for approx $400000, in current times I'm not so sure this would be the case.
If I sell the house before Aug 09, I have all costs of selling (advertising, loan payout fees etc etc) all reimbursed to me.
I know that now is a bad time to sell and a good time to buy, and I am keen to begin investing in more properties in the near future. However I have no savings – only the equity in the Yamanto property. I have personal debt of about $5000 which will be gone in the next couple of months, leaving me around $500/fn for savings. I do not want to draw out the equity in the property as it is already substantially negatively geared and doing so would just increase my out of pocket costs.
What do you think. Should I sell now and take the possible loss? Hold out until next year and hope the market improves (and sell before aug 09)? Or hold for the long run and sell when the market is better? If I hold, how do I go about investing in more properties in the mean time with minimal deposit available.
Looking forward to hearing your thoughts.
Out of curiosity, why will you have the costs of selling reimbursed until 08/09? And what is a realistic sales figure in the present market?
Mick
I'm with the Defence Force and as I was posted from the location I am entitled to have the costs of sale of the house reimbursed if the sale takes place within two years of my posting notification. You can find info in http://www.defence.gov.au/DPE/PAC/
From what I can establish, houses in the same neighbourhood are being listed from about $360000. The most recent sale was for $355000 and that was in March. I'm going to ask a few real estate agents to value it when I am up there next month to get a better idea of what they think its worth. I know my house is a higher quality than the other houses in the neighbourhood as I was living in mine when they were being built, so I know the sizes, the floor plans, the features and the quality of finish in comparison to mine, but I think if anything that works against me.
What loss are you taking if you sell for 320.000 ?
Looks like you would have WON 15.000 dollars ?
Is it just me ? Equity is NOT real .. it's mythical , fairy value, it doesn't exist until you SELL.Sell now, for 320.000
Just because the mortgage is $305000 doesn't mean the house cost $305000 to build. The house including landscaping etc cost around $330000, and then if you consider two years woth of interest….well $320000 would be a loss in my opinion.
atevans wrote:Just because the mortgage is $305000 doesn't mean the house cost $305000 to build. The house including landscaping etc cost around $330000, and then if you consider two years woth of interest….well $320000 would be a loss in my opinion.Welcome to the housing crash, caused by negative gearing ( a fancy word that really means "investing with a loss"). You invested with a loss, what did you expect really ?
All I can say is that house prices are going downwards, and they won't stop anywhere before 2010. It's going to get worse as inflation catches up, oil is prognosed at 250$ per barrel, unemployment is set to rise, interestrates are set to go up by 0.5% this year ( and more next year ).You decide.
Hei Scamp
Should invite you to join Domain.com.au's blog about property spruiker… I m sure you will enjoy posting your comments in there
CheersDoes anyone have any constructive comments they would like to make. I'm a bit sick of reading Scamps 'doom and gloom' comments.
The house was my PPOR…it was not purchased as an investment property. It is currently tenanted while we decide what to do with it.
why do u only charge $300? i have no idea where Yamanto is, but a rent of $100/wk/room in my opinion should be the least you should charge. have u asked around about the market price for rents in Yamanto?
if u can sell for $350000, i suggest u sell it and buy 3 properties costing $100K each that are positively geared. negative gearing is not a wise investment if you do the maths. if u think otherwise i can do a quick math for u to shed some light on why positive gearing is the way to invest correctly and be more wealthy.
I completely agree with you about positive gearing vs negative gearing. And once we start buying investment properties, we will be searching for positive cashflow opportunities.
$300 is low for the area (Yamanto is near Ipswich). Market rent would be around $330-$350 for the house. However my tenant is a defence member also, so I have added security as well as not requiring the services of a real estate agent. No doubt if I did use a REA to rent it out, I could get more for the property, but I would lose a portion of it in management fees, and may not end up with as good a tenant. The rate was based on the rental allowances and ceiling defence uses. I would have to charge $600 a week for the property to be positive cashflow, so increasing the rent is not the solution.
atevans wrote:Does anyone have any constructive comments they would like to make. I'm a bit sick of reading Scamps 'doom and gloom' comments.The house was my PPOR…it was not purchased as an investment property. It is currently tenanted while we decide what to do with it.
You said yourself "I currently have an IP in Yamanto". You also wanted some good advice which I gave you : Sell your house now. What do you want these people to tell you ? You want someone to give you a golden tip to instantly turns your money-slurping, negatively geared PPOR ( or IP whatever ) into a gold mine ?
There is no such way. Hence you didn't get any feedback. There's no 'easy money' anymore.Just put me on ignore if you don't like my comments. Ignore the whole problem if you like, stop paying your mortgage, ignore bank notices, ignore the sheriff when he comes around, ignore the news.
it's what everyone on this forum seems to do. Ignore everything , and hope it goes away.
Problems don't go away by sticking your head into the sand my friend. Take action now, sell the house, take the loss ( or profit whatever ) if you are losing money. If you are making money, keep it. It's as simple as 1+1=2 really.Hi Kai, where are you going to find 3 positively geared properties for a 100k each these days??
Hi atevans,
Are you looking to sell because it's costing you too much to hold? My opinion is, if you can hold it, don't sell – it's a buyers market and you will almost definitely not get the best price. If you wait 12 months the market will pick up and you'll be in a position to negotiate a much better price. Residex/RP Data/BIS Shrapnel are all forecasting price growth to accelerate next year and into 2010, so I would avoid selling now if you can. I read this just thismorning:
"BIS Shrapnel forecasts Brisbane, the Gold Coast, the Sunshine Coast and Darwin will show the strongest price growth through to 2011 due to significant pent-up demand in these markets and strong employment and wages growth, especially in Queensland… healthy underlying demand, together with strong wages growth and outperforming economic growth in Queensland have not only improved affordability for many, but also resulted in a return of confidence in the Brisbane market. BIS Shrapnel forecasts Brisbane’s median house price will reach $422,000 in June 2008, a rise of 15 per cent for the year. Over the three-year period to 2011, the median house price is forecast to rise by a total of 22 per cent."
Out of interest, have you got a depreciation schedule? We have one of our IP's depreciated and it allows us deductions of a further $7,500 approx per year, which definitely helps. There are capital gains implications when it comes time to sell but we are looking to grow our portfolio and hold long-term. (You could probably avoid any CGT implications anyway as your property was a PPOR originally, and you will likely be able invoke the 6-year CGT exemption rule for owner-occupiers.)
I have 3 IPs in total and all are negatively geared, costing us about $450 per week at the moment (before deductions and not including deprecation benefts, which we claim at EOFY for a nice lump refund). So our costs are around $23k per year, but we get roughly $9k back in deductions, depreciation, etc. For me, $14k net per year a small price to pay for 3 investment properties that have grown in value by about $80k combined since we bought them (late in 2006/early 2007), and that will continue to grow… our rents have also gone up by $70 across the three properties (one property by $40, the other two by $15 each), so as the rents go up, our expenses will go down. Positive gearing works for some people but I see property investment is just that, an investment, so I'm happy to wear the tax-deductible costs now to reap the strong capital growth benefits.
Anyway hope this helps, just a few thoughts to help you weigh up the decision!
cheers
Hi Shayde,
Thankyou for your feedback! It's good to get some useful comments.
As far as affordability goes, holding the property would not cause us grief financially, although it does consume about $700/fn of our money. Including the depretiation (I haven't done this yet) I expect a nice little tax return. Our main reason to consider selling is to give us some cash for deposits in order to invest in more properties, hopefully positively geared.
If we don't sell, I expect it would be difficult to get finance, with no money as a deposit.
At this stage, we're thinking of putting it on the market, but determine our minimum acceptable figure and stick to it. If it doesn't sell for 9 months, then so be it. We're not that deseprate for the cash that we need to take a loss on the house.
Thanks again.
700$ a fortnight is 18000$ per year of loss.
Devaluation is about 2% per month now, so that's another 24% of 350.000 = 84.000$ loss per year
You're losing about 102.000AUD$ per year keeping a 350.000 house.I'm sure in 2010 the house will go up again, but by that time you will have lost 204.000$.
For it to go back to old prices, you'd need to keep it about 20 years for it to become positively geared, all that time you will lose money.I understand you say "we accept the losses" but 20 years of losing money sounds like crazy to me.
Save it up in an account, and you can buy a 1.000.000 ( million ) dollar house in 10 years, CASH, without mortgage. Just for selling now, in current climate.scamp you got email champ tried to PM ya however not available..
Didn't get any mail, sorry. I use gmail, maybe it got spam-marked ?
Hi,
I have been advising all of my owners not to sell as the returns are starting to get bigger and better and closing the gap between what owners need to put into the mortgauge out of thier own pocket. We handle quite a few rentals and over the past 12 months the gaps on some properties have closed by about $100 a month. I have heard rumours that rental prices will inflate by a further 10-15% depending on areas over the next financial year.
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