Hi Everyone, I am new to this forum and desperately need some advice on an investment property I bought 18 months ago. I am having serious doubts over whether the property is a worthwhile investment or not. Our property is a 3 bed house in Pottsville on the north NSW coast. It is in a gated community and was built 2 years ago. This area is supposed to be ‘the next Tweed Heads’ and there is plenty of infrastructure etc going in to support the fact that the place is set to boom. My concern is that we are paying out so much each year that I really question whether the value of the property in say 5 or 10 years time is really going to pay off the money we have put into it. Here are the facts:Mortgage Repayments – $2600 per monthRental Income – $1283 per monthOther – We also pay all the usual rates but also Strata fees too. Total approx $160 per monthPurchase price of property – $385,000 (although currently would sell for about $370,000 due to economy) Therefore I am contributing $1477 per month in addition to rent to cover the costs. Total – $17,724 per year.
I have had a depreciation schedule done however my accountant hasn’t really been able to give me a clear indication of exactly how much this returned for us.
Do you think I am better cutting my losses and selling the property now or should I stick with it, keep paying the $17k and hope that it booms over the coming years? I probably couldn’t afford to hold the property for more than 5-10 years. Thanks all… your feedback is MUCH appreciated!!
Hi Amy
I havent been down to the area for along time but last time i remember it was a wonderful environment.
Look i dont know whether you figures are accurate or if they are whether you should seriously consider refinancing a Interest only on a loan of $385,000 at the current rate would be around $1925 / month. This seems to be a long different to your $2600 / month.
Also have you claimed any of the loan related costs in your Tax return ?
Your Depreciation / Building Write off sounds like they are non existant however the property is fairly new.
Dont like to doubt your account but i am not convinced he has claimed anything for you.
If you are PAYG have you lodged a 221D variation.
Sounds like you might need a bit of review on the whole loan / structure as i am sure this would save you considerably.
Richard Taylor | Australia's leading private lender
Hi Richard,
Thanks for your comments.
I had considered refinancing however I am locked in on the current loan for another 3 years and the break costs are huge. We did get some advice however were advised against it because the costs were so great. So either way if I sell or refinance I am going to get stung with massive fees.
Our accountant is aware of the loan fees, so assumably he would have claimed them. However I am with you in that I'm not sure he has really saved us much at all!! As for 221D variation I have never even heard of this!!??
Ring him and ask him.
Will aid your week to week cash flow.
Richard Taylor | Australia's leading private lender
Hi
Agree with YiF on this one. In simple terms using $17k negative impact as a starting point if you take off your tax credit that would leave a net impact of $12k (assuming your marginal tax rate is 30%) and this doesn't include any depreciation/write off benefits. If this is a new gated community then that depreciation/write off is going to be huge.
You need to get your head around the numbers. Get the accountant to send you the depreciation schedule first and if he can't help you get across the numbers then get yourself a new accountant.
Property itself sounds good – I wouldn't sell it. Just need to drive the numbers a little harder.
Cheers
TheBishThanks both… Really appreciate your feedback.
Regards
Amy
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