Hi everyone,
First time user here.
The dilemma I have is that we have had an IP in Townsville (Mount Low) for the past 3 years that has failed to meet performance expectations in terms of rental returns. Admittedly, we entered into this investment as naive investors but thought it would be a good tax reduction strategy for my wife who was earning a very good salary. Sadly, she was made redundant just before Xmas.
My gut feel is to quit this property (and take the capital loss on the chin) and perhaps look elsewhere when our personal situation improves, but my wife keeps telling me to hang onto it as IP’s are always long-term propositions.
I would dearly value your learned and respected thoughts.
Thanks everyone.
Hi Andy,
I can understand your wife making that comment, and from one angle she is correct (i.e. property investments are typically long-term investments). Perhaps the point she is missing though could be this – if an investment sours, it is often better to “cut your losses” than to hold in hope. Without any actual numbers though, an indication either way is impossible.Think in this direction though – if the current investment property is costing you money, and its short-term future for growth and/or an income increase are close to zero, would you be better to turn any remaining capital in another direction (one where it will PAY you to purchase it?)
With your wife now not working, ALL of the costs that aren’t covered by the rent are coming out of your dollars, and these could likely be after-tax dollars. See, if your name is not on the title, you might not be able to claim the costs against your wage. But then, I am not an accountant, so maybe there IS a way that can happen.
What I am endeavouring to do is to point you toward working out HOW many dollars it costs you to keep it – if too many, the prospect of a sale should put its hand up just with the numbers.
The capital loss itself can be offset against any future gains (but maybe not by you – only your wife – but again, an accountant should help you with any planning around this). Find a good accountant if you don’t have one already, and seek out an adviser to help plan “the way out” from a finance/investment perspective. Good luck on this journey, and do come back with any further queries and/or an update or two,
Regards,
Benny
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