Hello, I’ve just bought my first IP using equity from my POPR for the deposit / renovations. I put down 20% deposit which was $15k and borrowed $60k from the bank. I’ve spent about another $18k on fixing it up, new roof, electrics, plumbing etc. Rental income is $110 a week, the agent thinks I could increase this, but the tenant is very good and I wouldnt want to lose him. What would people advise? Should I now refinance (hopefully the value has gone up due to the renovations) and free up some of the cash I’ve put in, or just leave things as they are.
Many thanks,
SimonIMHO I would get the house revalued and try and release the security of your PPOR it is always better if poss to keep your own home as unencumbered as possible.The rent appears to be on the low side, how does it compare to other properties in the area?
[email protected] Always have cashflow positive Tasmanian commercial properties
availableHi Simon,
I tend to lean against selling, especially if its delivering positive cashflow.
You mentioned that the tenant is paying below rent. Well if ther good, then its worth kepping it that way. The alternative is to offer to put in some fixture as a ceiling fan, heater, cooler etc. and have them pay an extra 5$ rent a week for it – in the long run – ur better off.
I also agree with Garry in that you should re-finance it and that property as security for itself but don’t sell it – never put your PPOR as security – NEVER – if worst comes to worst then at least you’ve still got a roof over your head.
Take care and invest wisely
Kind Regards,
George.I’ve found a way to help you save and earn whilst not selling or delivering any product. If interested, drop me an email or PM me to find out how
i would think it’s better to have it re-evaluated and refinanced.
Hmm, the rent’s low, it’s not exactly cashflow positive is it?
i might want to increase it a bit, esp after you’ve done so much renovation works and all.
There’s no Such thing as No Can’t Do!!!!!
Syoung,
Seems you’ve spent about 93k on the place and you get $110 rental. When you say “refinance”, what do you mean? Get a valuation done? Or change banks? If oyu’ve fixed up electrics, the roof, and plumbing, that’s not really “improvements” (such as a reno- new bathroom, new kitchen etc. might be). What you’ve done is more bring the property up to scratch- that’s basically repairs. I am not sure repairing a place that needs it, would raise the value of it much, unless you bought it under value to begin with.
Properties are only really worth what other properties in the area might be valued at. If the property is now more “tenantable”, then you’ve done well in value maintenance.
You might be able to make additions to the place for the tenant, and up his rent, but it might be an idea to ask him what he might like. If my landlord asked me if I want a plasma TV and he would up my rent… I’d say “ummm.. no thanks- I have my own TV.” There might be some things your tenant wants- ask him.
If other equivalent properties in your area are renting for $110, then the tenant might not go for the rent rise. For the price you’ve paid for the property, it sounds as if it is rural. But if it is the tenant’s home, then he may want to stay. Perhaps you can negotiate something with him. Tenants are the asset of our IP’s- without them, our places may as well be a car.
kay henry
Hi Simon,
I’ll leave the ‘unemcumberining of cross colateralization’ (If you think that’s hard to type then try and get me to pronounce it!) to others on the forum. As to raising the rent. I live in Melbourne and I have noticed a lot of ‘for lease’ signs in just about every street. I have friends who live in areas like St Kilda who have signed a lease and now in winter are feeling the cold (it was ‘hip’ to be there in summer) and are now questioning whether to renew there lease in February. I know if their rent was to increase they definetly will not renew. My advice would be to ask yourself what is current rent in your IP area as tennants will no doubt be wanting to know that as well. Try value adding but IMO when sucking on the marrow DON’T CHOKE ON THE BONE. If your’e able to increase the rent by value adding then I think that would be the ideal. But to lose a tenanant and have a vacancy for ? amount of time may need to be weighed up. Good luck.
Kind regards,
Gatsby!
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