Hi everyone,
I’m interested to hear some opinions on making my next move to expand my portfolio. I’m considering selling one of my two investment properties to free up some cash but can see pros and cons to both selling and keeping this particular property. It’s an absolute gem as far as investment properties go, but can let it go if it’s the right decision.
It’s in a great location relative to CBD/beach/infrastructure etc, has never been vacant for more than a week between tenant changeover, gross rental yield is currently 7.1%, and I have a good amount of equity built up. All these are a good argument to keep it long term, but to be able to purchase more property I need to free up some cash.
If I was to sell tomorrow, after selling costs/CGT etc I’d end up with somewhere between $150-170k in my pocket. I also currently have $75k invested with a local developer, which would give me approx. $250k to play with once the development I’ve invested in is finished.
So here’s where I have to weigh up my options. If I take out $50k for “rainy day money”, that leaves me enough for deposits for let’s say up to 3 properties. What does everyone think is the best option? Divide the money into 20% deposits and buy as I find them (with them being negatively geared) or sink it all into one, keeping my LVR lower and closer to positive cash flow?
As my spouse is very anti-investing, this property (having bought it as my PPOR before we met) is the only platform I’ll ever have to build a property portfolio/passive income so it’s critical I make the right decision regarding my next step forward.
I am interested in hearing from anyone, regardless of level of experience.
cheers
Pete-
This topic was modified 9 years, 3 months ago by
Pete.
Hi Pete,
A few things I am reading in there tell me that you may have more options than you think. I’ll mention some that “stuck right out” and see if the facts around them might sway your decision one way or the other. Here are what I read….
1. You had bought it as your PPOR previously, so is it possible that there might be NO CGT to pay? Talk to an adviser re that one (one on here?).
2. Since you appeared to be wanting to purchase several other IPs after gaining deposits, I “assume” your Income is pretty strong to handle multiple loans – thus, it might be strong enough to simply do an Equity loan on the old PPOR rather than sell it. Weighed up against THAT though, is if it can be sold with NO GCT, then this can have a better outcome in some situations.
3. From your comments about this IP, it sounds like one that is worth holding on to, unless (as you say) keeping it is holding you up in some way.
4. “To be able to purchase more property, I need to free up some cash” – or do you simply need to free up Equity without selling?
Let’s see what others have to offer – look out for those with useful “sigs” under their names. These are ones who can really advise you – my offerings are simply thoughts around the situation, not advice.
Benny
Hi Benny, thanks for your thoughts on this.
Some answers to your post….
1.If there is CGT to pay if I sold, it should be minimal. On the advice of my accountant, I had the house valued when I moved out. The house next door which is essentially a mirror image of mine sold not long after I left for a figure that’s (as an estimate) maybe $20k less than mine’s worth now (had it revalued earlier this year as part of refinancing). I based my potential net profit on this lower figure.
2. In terms of my income I do earn a decent wage, although in the last couple of years there have been some quiet spells where my income has dropped for a period of months (I work in a niche market of the manufacturing sector of the mining industry) which is partly why (potentially) over-committing to a highly geared portfolio perhaps isn’t as attractive as it once was. I’ve used equity loans against the property a few times to fund other investments with great success and is definitely what I’ll continue to do if I choose to keep it.
3.The only reason I would sell is if it was the only way to keep moving forward. If I was to sell, then invest the bulk of my capital with the local developer at 20%p.a return, I could boost my income by $40k+ per year which would go a long way towards servicing future loans.
4. Is the $64000 question. I look forward to hearing what people have to say!
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This topic was modified 9 years, 3 months ago by
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