I just wanted to get peoples thoughts on my current IP in Sydney. I bought it for $330,000 in 2009. I am now considering selling the property as the expenses are starting to add up.
I owe $345,000 on the property as we used the equity to buy 2 more properties. We were getting $400 a week rent but the property has now been vacant for a week and are being told by our not great property manager that we will probably have to reduce to $385 a week as there is alot to rent in the area at the moment.
The bank valued the property at $400,000 realistically we could get at least $420,000 for it maybe $440,000. Do you think the ceasing of the first home buyers grant would see more first home buyers looking to buy before Oct? Our unit in the inner west of sydney is very attractive to the first homebuyer market.
I have just had my first child and was hoping to use the money from the sale to pay down our PPOR so that we would have very minimal repayments and look at doing some renovation projects.
Is it true though that most investors say never sell?
Hi Mel
Before you decide I have to ask you one question did you cross collateralise the 2 loans ?
If so then hate to say it wont be you deciding what do with the equity but the Bank.
They may wish to hold it as cash security or reduce your other debt. Re-using the funds to do a reno project may not be an option.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Richard for bring this up. We do have 3 separate loans so its not an issue luckily. !
So your agent says there is plenty to rent in the area… Have you researched this claim? How much stock is there advertised for rent on the realestate websites? Why not ring a few other agencies and ask their view on demand. Tell them you are an investor considering byying into the area
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
In a nutshell there is less effort involved for the agent if the place is offered cheaper, as it will likely rent faster. Don’t blindly drop the rent without confirming by your own research that it is necessary. If there is a lot of stock but yours is say the second cheapest already anyway, you’d think you’d have plenty of interest as it is
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
I know the agent advised us we should put up for 420- 430 we put up at 420 and have already reduced to $400 now he is saying we will only get $385. I think it is a bad time to be looking for tenants in winter. I am going to fly down on sat to some open homes to see what we are up against in the rental market and sales. There is alot for rent but not much for sale.
Based on getting $385 a week The unit is costing us about $90 a week on an interest only loan. Im guessing with principal we would be at about $150 a week. Is this alot for a negative geared property thats probably gone up about $100,000 in 3 years?
Price dropping is the one thing most investors struggle with. Yes, the last tenant was paying more previously, but what is the rental market doing now? How many tenants are making it to open inspections? Are properties leasing quickly in the area or is the market slow? If there is a lot of stock and yours is the second cheapest anyway… how long have the others been on the market? Longer?
A bird in the hand is better than two in the bush. Every week that goes by is potential rent in your pocket.
Why is there no interest? There are three factors to look at when a property is not leasing (or selling…):
1. Property: Does it present well? Does it need some TLC? What are prospective tenants saying about the property at open for inspections (your agent should be asking them and passing on the feedback)? Is there some small update you can make to push the property (replace the kitchen blind, do some gardening)?
2. Location: Has the location deterred tenants? – again, your agent needs to get feedback from prospective tenants. Not much you can do here but reconsider pricing to generate more interest.
3. Price: A drop in the market may mean that the previous tenants were paying more than market value before they vacated, but you're expecting to get at least the same rent if not higher because traditionally you should, right? I'm seeing this a lot in Melbourne and it's a difficult situation. A property is only worth what a tenant is willing to pay for it, so adjust accordingly.
If you don't your agent's assessment of the market value and trust their knowledge of the market – why are you letting them lease and manage your property? There are some great agents out there so take the time to sift through the crap and find someone who cares about getting you the best result!
If you're happy to stay with your agent, go and see the property and then do your own assessment based on available comparable properties, these are your competition. Whilst much of pricing is to do with the agent's experience in the market (hence I always recommend you go with someone who knows the area), you can get a good idea of what it's worth – just remember to be objective.
Ask for mid-week open for inspections to be held in addition to Saturday opens. Preferably 5:30-5:45pm depending on location of the property so that people can attend after work. If it's in close proximity to the CBD then 12:30-12:45pm so people can attend on their lunch break. If your agent argues with this – find someone who won't.
Thanks Kristen you bring up some good points. I do think there could be some issues as the common fence on the property has fallen down and not been fixed yet. The unit may need an update but we are looking at about $10,000 to do bathroom and kitchen and I am not sure if it will increase the rent significantly. The unit also has courtyard which appeals to some and not to others.
I thought we had a good property manager but am realising we may need a new one so will be heading down to Sydney on Sat to address the unit and market. I spoke to another agent who said the rental market in Sydney is patchy at the moment. We were getting $385 3 years ago so its strange the unit is not a dump!
Decisions decisions not sure if we can afford a property thats draining nearly $100 a week when im on maternity leave! Leaning more towards selling and reinvesting in an area with better yields.
Sounds like you're on the right track to find what's suitable for your situation. If you do your sums and the selling costs won't eat too much out of your profits and puts you in a better position, go for it.
You could continue to try to lease the property on say a 6 month lease (or offer negotiable lease term) whilst marketing for sale to have some rental income. You'd then be pitching to both investors who don't want an empty property and owner occupiers – by the time it's on the market if you've got an owner occupier looking a longer settlement period could be arranged to coincide with lease expiry then give notice to tenants.
mellissac wrote:Based on getting $385 a week The unit is costing us about $90 a week on an interest only loan. Im guessing with principal we would be at about $150 a week. Is this alot for a negative geared property thats probably gone up about $100,000 in 3 years?
So it's cost you $90pw for 3 years. That's $14,000 and you've increased in value by $100,000. I'd say that's pretty good.
Based on that though, how much do you think it will increase in price in the next 3+ years.
Also by the time you sell and pay the loan and CGT it's not a huge amount.
I am in Sydney and have a few IP in the inner west area, also I lived and fimilar many suburbs in the inner west.
which suburb is your property located ?
I can give you some thought about the suburbs.
there are some suburbs in the inner west are very easy to get tenant or sell proprties.
The property is in Earlwood so less popular suburb than the neighboring marrickville.there is quite alot to rent in 400 range in marrickville at moment.You can see my unit on on domain or real estate it’s yellow brick one with courtyard let me know your thoughts.
I see, I lived in Earlwood for a couple of years before.
you right, Earlwood is a bit less popular than Marrickville.
The NSW budget to end the first home grant may push up the price a little. It happened last year when the stamp duty concession end, many first home buyers rush to the market.
As you mentioned that this property is take away 100 per week and you just had your first child.
If I were you, I would sell the property.
just to take advantage of the first home buyer, then later on buy back to Sydney market once you back to work have a bit more cashflow.you see negative cashfloww for 100pw and first your child are draining a lot of energy. If market go against you in the next 3 year. it's only give to be harder for you and you will face the same question whether to sale or not.
Once you go back to work and have a bit more cashflow, then you have more capacity to move forword.just think about what you really want out of investment.
investment should and suppose to deliver enjoyment not the worries. if you are really "hurting" financially and waiting for the unprodictable capital gain is going to be a chanllenging.Earlwood is a first home buyers place, take the advantage of the NSW budget announcement.
I hope this is helpful
Hey mellissac,
In all this matter everything is nice for you to take nay decision but There was only one thing that’s actually about the loans that you’ve got and i think you’ve mentioned above there it’s 3. so why not it’s an issue?scha9799 You have captured exactly what I am thinking. The unit was our first home and it definitely will appeal to this market. We looked into selling when the government ended stamp duty concessions and were told we may get 450,000 then so there was certainly a spike. Its gone back down again now but I think there will be a few more buyers this time just hard to tell if prices will increase much.
To throw a spanner in the works we have had 2 applicants today to rent the place for $400 a week .
Yep, Syd is heating up – especially the inner West.
Congrats on your sale. That's great news
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]
Thanks Jamie still was not an easy decision as i do believe the inner west will continue to grow but the sale suits our circumstances at the moment so we are happy.
Hi Melissa, did you sell this traditionally or creatively? Have you bought another property? Regards, Tamara
Well done! When I saw the date I hoped you hadn't sold then.
Sydney is going gangbusters. I'm selling one next year as I think it still has some growth in it. Maybe a few more if this keeps up then retire. Yippee!!!!
Tamara we just put it up for Auction but had a price we were happy to sell at so sold before Auction. We had a good agent. I know Catylst there is the chance it will go up even more but we just didnt want to miss this opportunity. I certainly wish I bought more in the inner west 5 years ago I would be retiring to !
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