I have a positive IP in NZ which I’ve owned for 5.5 years. I’m currently trying to decide if it’s recently become a millstone around my neck and is it perhaps time I got rid of it even though I wont make as much as I had hoped on it. Do I just cut my losses and move on?
I have over the last 4 months spent about $6,000 on it doing upgrades and maintenance work. All value added and not an over capitisation. Most of the costs of doing this have come out of my own pocket, as although it’s positive, there wasn’t that much money in the kitty. Of course I can claim these costs back in one way or another.
Why I’m thinking it may not of become as much of a viable venture anymore is because I have just had my long term tenants move out and haven’t, as yet, managed to re rent it, regardless of all of the recent upgrades, and because I have just had it appraised by a real estate agent and the result was disappointing. If I sold I wouldn’t lose money but I wouldn’t make as much as I had hoped.
I obviosuly can’t afford to have it unrented for an extended period so have made enquiries about selling it. The properties in that provence of NZ at the moment are going backwards and if I had tenants I wouldn’t even contemplate selling. It will be awhile before the prices come back to the point that they were at two years ago.
I am very keen to purchase another IP and went to the bank recently enquiring about using the equity that I thought I had in the unit. Since the GFC NZ banks now won’t loan more than 70% of the value of the property and because it isn’t worth as much as I thought I was only going to be able to get access to a small amount of the actual equity that I have in the place. So have started thinking would I be better of selling it which would give me access to all of the profits and would allow me, along with some of my own funds which would now be needed because of the short fall due to the lower valuation, to purchase two more properties. Although this one was giving me a good return I figured the return from two would be a better option.
Would this be a good move or do I have to hang in there?
Wendy
Have you thought about lowering the rent a little or offering some otehr incentive to entice renters. I wonder how much you will come out with and be able to buy by the time you factor in agents fees and commissions to sell, legals to both sell one property and buy two more properties as well as the building and pest inspections.
Once the property is rented again you may be in a better financial position. Are you looking to buy again in NZ or OZ? Maybe you can get an IP in OZ at a higher LVR
Sonya
I was going to say what sonyasai said. Maybe try and lower your rents. If you can lower your rent and get someone in there for 6 months, maybe in 6 months time your situation might change and you will be able to charge a higher rent again.
Ryan McLean | On Property
http://onproperty.com.au
Email MeThanks Guys,
Just had the place appraised and as it turns out it isn’t worth selling at this point so I’m left with needing to rent it out. When the unit was first advertised the agent tried getting the rent up from where it was and we have reduced it from there since. It’s now currently be advertised for only $5 more than what I was getting from the last tenants. Is it worth going backwards in rent?
I have for a long time now been unhappy with the agent but tried persisting because he’s always been the agent. Now doesn’t seem to be the right time at all to change agents or is it?
I can’t think of anything else that could be an incentive to get it rented any faster. I’ve just refurbished the place inside and out and it in a very tidy state. The only thing I can think that I could do would be to include lawn mowing in the rent but is that really an enticement?
Wendy
Don’t stress Wendy,
This happens from time to time. If you have been unhappy with your property manager for a long time it might be time to change. You should interview a few PM’s before choosing one though, to try and lower your chances of getting a dud.
It can pay to go backwards in rent for a short period of time. I wouldn’t be doing it on a regular basis, but sometimes the market is more difficult than other times. When it is hard it can sometimes pay to lower your rent, then raise it later when the demand is higher. Lawn mowing in the rent is not enticing at all. In fact I would be annoyed if someone came round to my house and mowed the lawn (I rent a house).
Good luck and keep us updated.
Ryan McLean | On Property
http://onproperty.com.au
Email Me
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