Hi friends. I'm currently undertaking my first development, and I haven't decided whether to sell or rent the units when they are built. Both options are good – if I sell, I will make good equity; if I rent them, it will be on a good yield. Basically what I'm asking is whether new houses are like new cars, where you drive it out of the dealership and it loses 30% in value. New cars have a premium just because they're new and unused. Would it be the same with townhouses? All things being equal, would a brand new townhouse sell for more than a 2-year old townhouse? I wouldn't want to lose the ability to realise that premium sale price by putting tenants in there,only to sell 18 months later for a second-rate price. Thankyou.
It's a tough one.
In a growing market – I'd assume a two year old townhouse would sell for more.
In a stagnant market – it wouldn't make a difference and may even have sold for a little more when brand new.
The biggest consideration here is how long do you plan on holding them for? If for only a couple of years – then selling could be a good option. If for a long time – and there's scope for future CG and the yield is strong, then I'd hold. Depreciation will be pretty good too.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Make sure you seek good taxation advice before you sell – there will be CGT and GST issues you will need to consider.
These two issues will erode your projected equity profits if not managed carefully.
Depends what stage you are in your property career. If you haven't yet got a passive income to survive through all your investments then is renting the units( for no net cashflow) unless they were positively geared worth it? and also your aspirations for future developments. Selling 3 units out 4 and paying off the debt off the 4th unit (after gst,sales costs) could be a option to enable you to realise your profits now. But if you already self sufficient and cashflow doesn't interest you. Ie your going to continue to work etc then maybe keeping for growth is the option.
But also consider from a risk point of view having 1 property in one location vs having 3/4/5 properties in the same location and consider the effects of mortgages against those properties, if the market was to turn bad would there be enought equity to support a lower LVR. If you had one property with a LVR of 10-50% then you would have less risk.
If you only keep one of the properties. I would say keep that one property forever or at least 5 years from completion of the home .
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