I have a very negatively geared IP that I want to get rid of. But if I sell, I’ll still owe the bank about $42,000 after costs. But on the other hand it will free up borrowing capacity.
I’d have to hang on to the property for a long time to see some capital gain. But I figure that I can make up the loss with some better investments.
I think that selling is the best thing to do, but am interested to find out what other people think.
why the big loss – is there alot of consumer debt mixed in with the loan ?
Positive Cashflow NZ Property Deals.Email to receive current deals & Free New Zealand Information Sheet [email protected]Don Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
Hi DLPP – thanks for the reply. The reason for the big loss is that I bought at the peak of the market in 2002, financing 100% + costs, and prices have dropped since. Really dumb investment decision, but I’ve learnt a lot since then.
Would you buy the house at todays price or walk past it thinking it is a dog?
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi jnisted,
Been in same position so know how you feel. Just check with the bank whether they will release the deeds if you still have money owing as we got into the position where a contract was signed however the bank would not release the deeds as the purchase price did not cover the outstanding loan. We couldn’t make up the difference and had to pull out of the deal. Speak to a finanacial planner to see which is the best option.
[biggrin]Hi jnisted
It may not be necessary to sell your IP at a loss. It could be possible to sell it with vendor finance which may allow you to sell at “your” price and generate positive cashflow while the purchasers (wrapees) use your vendor finance.
At the risk of being accussed of advertising, here are some details of two couples in a similar situation that we’ve recently helped.
S&L had been trying to sell their negatively geared IP for $290,000. This sale price would have given S&L a reasonable return but they couldn’t get an offer. We entered into a Joint Venture agreement with them to sell the property, using vendor finance. The property has been sold, using an Instalment Sales Contract (Wrap), for $315,000. While the new purchasers (wrapees) are using the Wrap contract to buy their home, S&L are making $200 per month positive cashflow. It is expected that the wrapees will refiance into a traditional mortgage in two to three years, at which point S&L will receive the remainder of the purchase price, less what the wrapees have paid off in two to three years.
V&S paid $335,000 for a unit. They owe $364,000 on it and it is seriously negatively geared. They have had it on the market for $380,000 and have not had an inspection, let alone an offer. We have set up a JV agreement to sell this unit utilising an Instalment Sales Contract (Wrap). We are now in the process of selling the unit with the following result. V&S are selling the unit for $380,000 on a wrap and will receive $100 per month positive cashflow prior to the wrapees refinancing into a traditional mortgage down the road.
Obviously we charge for the service but, due to forum advertising considerations, we won’t go into that here.
May I suggest you start researching some vendor financing techniques. They may just save you from a large loss.
Good luck.
Cheers, Paul
Paul & Karen Dobson
negative2positive
Turn your negatively geared property into a positive cashflow investment.
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi Simon
In answer to your question, I would not buy the property at today’s price as it would still be negatively geared, and yes, I would think it is a dog!Hi Ellis1. Thanks for the reply. I’ll be able to pay the bank loan out as I’ve got another property on the market which I’ll make a very substantial CG on. If the dud sells first, I can transfer the balance of the loan to be secured by the other property, so will be able to get the Title Deed released. The 2 properties are cross collateralised now anyway, so that shouldn’t be too difficult.
Hi Paul – it has crossed my mind that perhaps using a wrap might be able to turn the situation around. Being a new investor, I need to gain a much deeper education as to how vendor finance works and to figure out whether it would work in this situation.
Can I email you privately to run through it with you and get some help in working out whether it might be an option?
No Probs – your pm suggests you are on the right track – best of luck.
Don
I Buy New Zealand Property – All types and conditions [email protected]
Don Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
You must be logged in to reply to this topic. If you don't have an account, you can register here.
