My husband and I recently bought out first investment property in Brissy in Oct ’03. Bought for $237k and rents for $275/week. With rate, body corp etc this property is quite -vely geared. (-$6500/year). After reading Steve’s book, I’ve been thinking seriously about getting rid of this property and starting again, this time looking for a +ve geared property. What do you guys think. Would you hang on to it and wait or just get rid of it? Love to hear your thoughts…
Congratulations on your property purchase. I take it your property is a unit. Many pundits are tipping Brisbane still has a couple years of reasonable growth left with something like 1000 people a week moving to south-east Queensland. Having said that, many area saying the unit market is oversupplied. Depending on whether you and your husband have a house you live in with reasonable equity in it, I would probably keep the unit and make sure you target +vely geared property from now on. I have a few negatively geared properties, but they are in such good growth areas, I am trying to find other ways of pushing on whilst retaining these properties. A happy medium! Good luck.
Reason not to sell- if you sell under 1 year of buying, you pay capital gains tax on 100% of the capital gain, plus all costs of selling- the cost of selling is not tax deductible, except as it applies to reducing the CGT.
Why not use the equity you may have gained in the above property to continue to buy further (cheaper/pozz geared) property instead of losing all that equity in taxes and other costs?
Depending on the growth in the area and how you can then use this in future purchases should give you an indication on whether to sell – if you can get great price for it then maybe it is time to cash-in and make a new start – maybe research the market first to find out what is right for now but having one property is better than none,
Given such a relatively short period of time since you purchased the property, if I was in your position (and of course I am not, nor do I know of your circumstances, however…), i would be reluctant to sell as a result of all selling costs and then buying costs associated with next IP, for the ultimate result of having still, only 1 IP.
I would ensure if it is negatively geared to capture all tax benefits in the interim ie depreciation etc. Keep saving and revalue property around Oct 04. Use that equity & other savings if you can to purchase next IP.
Advantage here is that you retain
1. Current IP
2. Current tax benefits
3. Don’t dispose of capital appreciating asset
4. Allow yourself to be in a position for 2nd IP
I suspect it may take a while to find your +ve cash flow property (?), so why not maximise the benfits that your current IP will give you.
Ultimately, it is time in the market that is the key to long-term growth.
Being in a similar boat,,having 1 neg gear prop my wife and i decided that the solution to the “little” propblem was to find cf+ IP to offset,
this has also given us a goal/target to work towards ie neutralizing the neg geared IP.
We are only begginers, but try fix the prob don’t ditch the problem it could turn into a nugget.
Thanks guys for your advice. It just comfirms what we have been thinking- to hang onto the property and chomp our way through the morgage. I agree that Brissy still has a lot of potential and we bought in Toowong which is right near a uni, shopping centre, transport etc so hopefully we will be doing the ‘right thing’ by hanging onto it. Cheers everyone