Last year (well before reading Steve’s book), I bought my first and only (at present) IP; a 2 bedroom unit in a resort complex on the Gold Coast, which was only a few months old. I was naive to trust the estate agent that said that the occupancy rate was 80%. As the unit was almost brand new there were no books that could confirm that. In fact I soon discover that the occupancy rate is about 60%, but with the onsite manager taking 12% and all the other expenses, insurances, rates and fees (lots of new expenses come up every month…)we are having a big loss.
The unit has increased 10% in the last year and we decided to put it up for sale, but we have calculated that even then at the end of it we would have lost around $20,000 between interest and fees paid. Some people think we should hold on it and wait until it would make enough capital gain to come clear. What do you think? Please note that I currently live and work in the UK (for 1 more year)and therefore I can’t deduct anything off the tax. Any advice is appreciated.
PS. In the meantime I am constantly looking on the internet for new IP and this time I think I’ll stay away from Units…Units are not a bad investment!
Managed units in the Gold coast are not as good as many other types of unit investments especially ones with no track record of rental yields!
G’day Middler…
I tthought I had another nightowl for company, but as your in the UK, I guess I don’t.
Don’t want to spoil your day…but
The problem is not Units but wher and who you are dealing with on the GC.
Some units will give a healthy return and moderate CG. But personally I have usually prefered a house/land. Then again I have done well out of units.
The problem as I see it is that the GC is notorious for getting ripped off. I had some good advice from a cab driver on the GC years ago..and I quote: ” There is plenty of money here on the GC but let me tell you, that they didn’t make it here…this is where they lose it”.
Good solid correct advice. As a mortgage consultant I have seen a lot of disasters regarding GC purchasers…usually paid too much…seems to be 3 prices (1)…Locals
(2) Southerners (3) O’seas BuyersI feel you have another issue…the person that is managing your unit in the complex had to pay for the Management Rights and I’m not talking peanuts either ( several hundred thousand $$ in other words he/she bought a job and also, probably paid too much. To recover from their situation fees etc are always on the up. Plus another little trick they use…see end message.
I can think of one client in particular…that has waited 7 years for his investment to recover his losses and he’s still waiting. If he had sold out 3 years ago when we first spoke, he could have copped his loss and doubled his money elsewhere since then.
Maybe you need to consider cutting your losses and investing in the real world..cause the GC ain’t.
A few final thoughts…How do you “really know” when your unit is let or vacant”. I have known of onsite managers to advise clients that their unit is vacant when in fact it’s not.
This is of course a double whammy…you cop the fair wear and tear they /mate gets your income on his vacant unit.Personally I think that you will get more if you sell today than in 2-3 years.
I wish I could help in a more positive way.
Cheers
Billfromoz
Thanks to all of you nightowls, for the replies. I guess that selling it and cutting my losses on it, is most probably the best bet. I don’t know how long it will take to get rid of it though, at the moment there are quite a few ripped off owners that have put also their units up for sale, competition is tough! Well let’s hope some not very wise investor will come along and get it off my back….
G’day…
Night owl??? It’s bloody daylight.
If you give buyers a reason to buy your unit as opposed to others and Buy it NOW…this will work for you.
Give the buyer an extended settlement…
up to 6 months. Don’t freak out…….They, of course MUST exchange unconditional contracts with you NOW.
That is …a firm settlement on or before a certain date…unconditional, no out clauses.You will not only get a buyer,but also, without being greedy, a far better price. The reason for this is that you attract those that are not game to sell their own home until they find what they want to buy. So, off they go and tell the Bank they gotta good deal and want a loan… “but we’ll sell anyway” In doing this you create a plus for you both. If they are unrealistic with their own asking price…as it gets closer to settlement time with you, the Bank will put pressure on them to “meet the market”
Example, I was told by two agents my property would sell for high 4’s to low 5’s.
Incompetence at it’s worst…. I sold iy my self within 6 hours of hitting the market and “at” the aking price $585,000…same marketing plan I am suggesting for you. There is no reason why you can’t replicate it. Alternative is to let them move in on unconditional contract and pay u rent if they need…but only on an unconditional ,exchxnge of contracts
Letme know when it’s sold…
Billfromoz
Bill O’Mara
Thanks for the advise Bill, I will try your system and let you know the outcome. In fact I am going to send an email to the estate agent and tell them to do that in order to get buyers to take my property instead of another one. Thanks again.
G’day Middler…
You could also give the salesperson an added incentive…say, $1000 Bonus if sold, with unconditional exchange of contracts, within 30 days, and AT the listed price.
Be specific..by 3:30pm on the 13th Nopvember’03.
I guarantee you it works. Suggest you run it by the Principle of the Agency…and ask him/her to not water it down by taking a cut for himself.
Keep me posted,love to know how it pans outfor you
Best of luck
Bill
middler
Whilst i am sure that Bill’s comments are well meanting just bear in mind 2 things:
1) In Qld it is illegal for an Agent to take more then REIQ commission by way of a bonus or incentive payment.
2) We don’t actually have an exchange of contracts in Qld.Don’t be put off by the poor performance of your property. Bill makes a good point most of the properties on the GC I see across my desk have been sold by marketeers not bought by investors (There is a difference).
Perhaps, next time consider a freehold standing house with good positive cash flow. Hope the weather in England is not too cold just think of your unit on the sand and in the sun.
Cheers Richard
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http://www.fhog.com.auThere is no such thing as a problem.
Just a solution waiting to be foundRichard Taylor | Australia's leading private lender
G’day Richard…
Thanks for setting the record straight re the 2 points you mentioned…appreciate it and I’m sure that Middler will read your comments.
I have found that “cabbies” advice, so true.
Thanks again
Bill
Quote:Thanks for those comments.Richard you are saying:
2) We don’t actually have an exchange of contracts in Qld.
So I wonder what kind of time limit can I say to the Real Estate?
Perhaps, next time consider a freehold standing house with good positive cash flow. Hope the weather in England is not too cold just think of your unit on the sand and in the sun.
I am looking for those, not very many around the GC (if any at all), what do you think about Rathdowney, is that an ok area to invest?
Cheers
Rita
PS.Weather in the UK is windy and pretty cold, depressing, yes I think about the unit and the money I am loosing…
Hi Rita…
Apologies for the bum steer on the “Bonus”…different rules in different states.
And, as Richard has said…the contracts are differet…sudden death. However I am sure that you can simply extend the offer of settlement on or before a certain date…When Richard gets back on line I feel sure that he will set this straight for you.
Wishing you well
Bill
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