Advice on losing situation

I don’t expect answers, but any advice or thoughts on what I could consider would be really appreciated.

Around 4 years ago I bought a property in Ballarat. At the time it returned around 6.3% which was high for the area ($260 p/w rent paid $215k), and whilst it looked slightly negatively geared my thoughts at the time were that with improved road and rail infrastructure making commuting the Melbourne more appealling that rents would rise fairly well over time and it would move to neutral and then positive relatively quickly. Instead whats happenned is that Ballarat has become appealing to Melbourne investors after cheaper property, and there’s a rental glut in Ballarat pushing our rent down ($250 p/w for last tenant and not sure we’ll even get that).

With lower interest rates it should theoretically only be costing us $1-2k per year to hold which I wouldn’t mind, but with “things” coming up each year, it’s been averaging more like $5k p/a out of pocket expenses, which is adding up quickly and I’m concerned going forward (we have about $30k left in a LOC we’re using to fund it, and that lasting 6 years is a lot different than lasting more like the 15-30 or infinite if positively geared which we’d hoped).

We put it on the market a few months ago, with the knowledge we’d lose money (around $30k by the time all costs are in) but with concerns not only for the ongoing costs, but also the sustainability of the property market atm we were ok with that. Since then we’ve had two purchasers pull out due to builders reports (one concerned with property development next door affecting our house, the other with a need to restump which their builders report stressed but that doesn’t match our understanding, I’m organising someone independant to check it out). The last one would have gone ahead if we dropped another $20k off the price, but that just seemed too low for us (wearing a $50k loss overall).

It’s a 100 year old cottage. It basically is what it is. Looks cute, but the floors not level (there are a couple bearers that aren’t properly on stumps anymore) and things have moved around. Some rusted downpipes, a garage that probably should be knocked down, stuff like that. However from an investment point of view at the asking price it’s returning 5.8% in a market where the average is 5%.

So I’m considering options. I could spend $20k addressing the bigger issues and doing some reno, but I’m not sure that will raise the value of the place even that much.

I could spend a minimal amount to make the place safe and presentable and just keep holding it hoping rents will improve over time.

It’s in heritage overlay area, so I could try to arrange to knock it down and build a couple of flats instead (390 sq m land area) either to hold or sell, but I’m not sure how the numbers stack up there, if I was even allowed to (I think the council would have issues given I assume it’s exactly the kind of place a heritage overlay is intended to address).

Umm, not real sure what else I have as an option. Maybe I just need to suck it up and sell at a price I can get and wear the big hit to the pocket.

Oh, not sure if it matters much, but we bought in a discretionary trust. With the losses atm it sure would be nicer to have it in our own name so we could deduct tax losses, but at the time we bought we thought we’d hold for a very long time and the idea was that most of that time we’d be making money, not losing it.

So, if anyone has any thoughts or advice, please let me know.