HELP! Some possible suggestions

Hi Sadie

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.

Here are some details of two couples in a similar situation that decided to use vendor financing to sell the negatively geared properties at a profit.

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’s 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.
Phone: (02) 4984 9540

Hi Sadie,

Just remember, you won’t lose unless you sell. You haven’t had the property very long. In a couple of years it could be capital growth positive. If it is a CF+ property and you have good depreciation (which you should have being so new) it may be worth holding on to for a bit longer.

It would be worth finding out a bit more about the economic drivers for the towns future. In a town that big I would be fairly confident of long term gains.

I guess if it’s holding you back from building a property portfolio in a certain time frame then it would be better to cut your losses and start again but you would have a fair bit to make up. Depending on your financial situation, there could be some tax advantages in making a capital loss though. It would be worth talking to a good (property savvy) accountant about this whole situation.

Todd Burns
http://www.freepropertyhelp.com.au