Just after a bit of advice from someone with more knowledge than me. I got an IP in Labrador in Goldcoast. Its a unit in a complex. It neg gearing pretty badly around 250 a week high body copr and rates and big loan. I'm thinking of selling it, its too much of a loss and hassle.
If I sell it for the price I think I should be able to get I will lose 40000. If I hold on to it I lose 250 a week, so thats 26000 over 2 years. If I hold it for two years I'de need it to go up 66000 just to break even right.
I want to sell, cop the lose and just move on. But I've been advised to hold on to it for 2 years because the area is about to go up due to huge population growth in the south east qld region.
Not excepting anyone to predict the future here, just like to know what you think that area will do in the next two years.
Unfortunatly i’ve seen plenty of people lose money on property – similar situations. Forget about capital growth at the moment and have a look at what rental returns have been doing in the area. E.g. How much does rent need to grow for it to become positivly geared? How long will this take based on average rental growth over say the last ten years?
Keep in mind most economist expect an increase to rates so work off 1.0% above your current interest rate.
Also see if you can restrucuture existing debts to minimise the repayments. See if you can get your ato witholding rates adjusted to Have more money on a week to week basis ( as opposed to a big tax return).
Cashflow is king. If you still can’t afford to keep it you need to explore selling.
2 years ago I had a client that owned a 2 b/r property within 5 km of Melbourne CBD. Sold before anyone had heard of the GFC and lost 70k. This was after holding for 3 years.
Don’t get stuck in the trap of thinking all property is a good investment. Do you home work and cashflow projections before you buy. Don’t buy CRAP property “just to be in the market”. Don’t pay above bank valuations.
Thank you for your reply some good points there.
I really do need to know what the market will do. Because if it does promise an increase in value its worth forking out the extra 250 a week to hold on to it. But if it remains flat for a couple of years then I'de rather sell make the loss and move on. Otherwise it will hold me back too much.I admit I messed up bought "crap property" I did get stuck in a trap here. In future I will do more research and be alot more careful. For now the answer I am looking for is how to fix this mess. Either get out and lose money but move on, or stay there losing money hoping the capital will cover it and come sooner rather than later.
So really i can't "Forget about capital growth at the moment" because ultimately this is what will my determine decision.
Thanx again.
Hi Ko
Have you thought of selling the property with vendor financing? It may be possible to structure the sale so that the property has neutral cash flow and you sell for a profit, or at break even at worst.
If you PM me a few “numbers” concerning the property, I’ll have a look at what may be possible.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
I don't claim to be a guru, but I just got back to Vic from Labrador. Stayed in a friends hi rise. It is a beautiful place, but has heaps of propertys on the market and more planned on being built. His body corp is about $120 per week. It is a growth area but in my mind the competition for both rentals and purchases will hold back the capital growth. I can't say whether to sell or not – all I can say is I wouldn't buy there. Property is in oversupply.
Hi Ko_Starr
Population movemenst over the past 8 years, averaged: +2.19% (ABS)
Capital growth averaged: 13.62% – Last year was 6.68% (Residex)
…next two years, I anticpate continued capital growth.
Good Luck
AA
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