I have 2 properties (one which I reside in) and a year ago, I bought a block of land with the intention of building on it around this time now (thinking the equity I have would enable me to borrow). Unfortunately, I am unable to borrow and with the current market, am unable to sell it at a profit.
Do I just sell at any price? Hold out for the profit in order to reinvest and begin the way I should be investing or just keep it (which is difficult to afford) and it means I have no borrowing capacity to invest further)
I am unsure and would appreciate advice from anyone who has some.
Cheers
TanjaaHi Tanjaa
Are you positive you are unable to borrow the funds needed to build?
Regards
Yes Shaun, unfortunately I bought a narrow block which means it needs a 2 story house and my borrowing capacity is around 130k., which is not enough for a 2 story.
Shaun M Smith wrote:Hi TanjaaAre you positive you are unable to borrow the funds needed to build?
Regards
Is this a place that you wanted to move into yourself? If so, are you able to sell your current place, lease it or elsewhere whilst the building is being built and move to the new one then.
Other options:
1. rent a room in your current PPOR to increase income
2. Look for private funding
3. JV partner if profiableJust a few thoughts
MickTanjaa
Are you sure your borrowing capacity is only $130K.
In todays market borrowing capacity varies considerably from one lender to another.
If you were able to build on the block you may find that the rent and tax deductions would make the loan more affordable and you could keep the property until such time as you could sell it on your own terms.
Would need some details on income / expenditure other assets and liabiities to give you a quick guide.
Richard Taylor | Australia's leading private lender
Sell.
The market will keep going down until at LEAST 2010. Then it will stagnate for years.
You will not get back your money , you can only lose more money the longer you wait.
Get a quote, then put it up for sale at 20% under that quoted price if you want to have viewers.
If you just want to put it on the market for the next few years without having any viewers, then put it at market at quoted price, then in 1 year, put it up for 20% less, and in 2 years, put it up for 40% less, and still don't get viewers.Scamp wrote:Sell.The market will keep going down until at LEAST 2010. Then it will stagnate for years.
You seem very certain of this, care to share with us how do you know that FOR SURE ?
Not that you couldn't be right Scamp but there are a few "corporate vultures" and "entrepreneurial predators" around as Graham Samuel puts it who could be spreading doom & gloom for personal reasons. So don't believe everything you read and trust no one.
http://www.news.com.au/business/money/story/0,25479,23866914-5013951,00.html
Stressed borrowers conned out of homes
haha. That's funny. What do they do to 'con' these stressed borrowers ? They offer them fair market value, which is 50% of what these idiots paid for their houses, which is the reason they are 'stressed borrowers' in the first place.
If you can't afford a house, don't buy one. If you buy something at 200% overpriced market value, then you should expect to have to sell it at 50% if you get into trouble. You see, if noone wants to buy your house at 500.000, and noone wants to buy it at 250.000, why would they be 'conned' when someone offers them 300.000 ? Either they sell , or they foreclose and risk getting even LESS.Stupid spruikers, defending the 'poor investors' who so unsuitably can't make 200% profits every 5 years because we have PASSED the ceiling of what people can pay. Now , people realize "oh shit.. I can't pay what I promised the bank I would pay them…"
Then they come up with "I got conned out of my house by an entrepreneurial predator"
Don't make me laugh, please.
Scamp wrote:They offer them fair market value, which is 50% of what these idiots paid for their houses,What exactly is fair market value ? If a scammer cons someone to sell them a property at 50% of the average price for a suburb does that bring down the fair market value for the whole street by 50% ?
Scamp wrote:Stupid spruikers, defending the 'poor investors' who so unsuitably can't make 200% profits every 5 yearsIf they made 200% good luck to them, however some of them are not " but rather owner occupiers who will end up renting .
I feel sorry for them because first they got conned by the spruikers and now they are being circled by vultures.Scamp wrote:Don't make me laugh, please.
Before you break into a laugh, you still haven't answered the question :
"You seem very certain of this, care to share with us how do you know that FOR SURE ?"tanjaa wrote:I have 2 properties (one which I reside in) and a year ago, I bought a block of land with the intention of building on it around this time now (thinking the equity I have would enable me to borrow). Unfortunately, I am unable to borrow and with the current market, am unable to sell it at a profit.You could look at renting your place and move in with the relatives until the new place is built and then sell one of them. As long as you rent your PPOR for less then 6 years and have already resided in it for over 6 months there is no CGT if you decide to sell and move into the new place. As a bonus you can claim a few expenses as well, like rates, water,etc. Worth looking into it anyway. To cut costs on the new building you could look at building to lockup stage and finishing it later yourself. (if you can swing it past the finance company that is)
cheersPerhaps you could have plans drawn up, and sell it with a D.A. But this may take months to get thru council, and whether you can afford to wait…
"The" market is a fallacy in my opinion, there are several markets within each capital city. Your local market may go up, down or sideways in the next yr. You may have a strong opinion on your local market, but if so, can you afford it if you're wrong?
If the above good suggestions of ways to afford to keep it don't work for you, selling now even at a slight loss (eg agents fees, legals) may be better than waiting, holding and then selling when you have no choice. or worse, the bank forclosing on you if you can't make your repayments.
If you decide to absolutely stretch yourself and borrowing eg thru low-doc loan (maybe higher interest loan) to build and sell, be very careful as you need to be able to service the loan.If you do decide to sell now and cut your losses, don't beat yourself up. Regard it as a learning experience, and cost things more carefully next time!,
For sure, worth asking your accountant's advice.Good luck,
quickchick
Thanks Quick Chick ,
Re: For sure, worth asking your accountant's advice……………. I have been very loyal to my accountant for the last 17 yearsand personally think the world of him, but feel that for the last 5 years, things have not been very advantageous professionally.If anyone can recommend a good accountant that they feel they have had a successful professional relationship with I would be most grateful.
Cheers
Tanjaathanks scamp for enlightning us with your wisdom as usual , you are entertaining………on your reccommendation we should all sell up, take our lowsy 50%, put our money together, built a giant ark, fill it with 2 of every kind of property investor, and then wait till the doom and gloomy rains end.
Hey, Tanyaa
What general area are you in? Would help you for accountant recommendations. I know what you mean, have been to (former!) accountant for advice, had him fluff around because he didn't know, and then received a bill for $350 for his non-advice!
Time to change accountants! A 'conventional' accountant will probably advise you to hold, so you don't realise a loss.
Problem is, 1. things could get worse in your area, eg price drops, or harder to sell due to ? interest rise.
2. you can't buy a good deal meanwhile, because your borrowing is maxed out.You don't need an accountant to tell you what to do, so much as clarify the numbers of each option so you can make an informed decision for yourself.
(I'm fascinated with Scamp's approach…. if you truly feel so bearish about real estate all over Australia in the short and medium
term, why do you bother with anything to do with property investing?)quickchick
It depends on your attitude to risk
1. Conservative. Sell it, and save the repayment drain from interest payments but perhaps make a loss when considering interest paid , stamp duties and possible capital loss
2. Moderately conservative. Park it and take the pain until you can afford to build. Will lose money on interest but may be able to make a gain in the future.
3. Risky : Build. Find a mortgage broker. Someone will find you a loan. Build. Pay interest only on the loan. Sell it or your current house. Hopefully make a small gain.
4. High risk. Find the broker. Borrow the money. Build. Get a tenant to help pay the mortgage. Hold it. Create an asset. Build wealth. The first step in becoming a property millionaire.Positive cashflow properties are better of course. I personally believe everybody can afford one negatively geared property with the ATO paying the mortgage for you. After that it can get tight depending on your salary.
Go for it
The Chisquickchick wrote:Hey, TanyaaWhat general area are you in? Would help you for accountant recommendations. Time to change accountants!
You don't need an accountant to tell you what to do, so much as clarify the numbers of each option so you can make an informed decision for yourself.(I'm fascinated with Scamp's approach…. if you truly feel so bearish about real estate all over Australia in the short and medium
term, why do you bother with anything to do with property investing?)quickchick
Quickchick,
I'm with you on all accounts!
– I'm in Brisbane, so any advice on accountants who could help with clarification in my situation (although I must admit, this forum has been brilliant…) would be great!
– Scamp, if you're that disgruntled with Australia and what it has to offer property wise, maybe hold off that trip?
Thanks to everyone for their advice – being a newbie to this, it has been really valuable (yes, even Scamp's doom, gloom and dire predictions.. )
Cheers
TanjaaTanjaa
Will give you his details Wednesday but if you want an excellent property Accountant and are happy to travel to the Northern Gold Coast feel free to call my Accountant who has acted for me for the last 12 years.
His name is Steve Hodgkinson and he is a partner at the Gold Business Group in Southport.
Steve can be contacted on 5532 2855.
Tell him i referred you as most good Accountants are not taking on new clients especially this time of year.
I have passed his details on to many of my clients from the forum and all have only wondeful things to say about him.
Richard Taylor | Australia's leading private lender
It's a shame that property investors gone wrong never bother posting here, it would certainly fire up the discussion. I'm not going to elaborate on why the property market is crashing, suffice to say that it will crash much harder and faster than anyone expected ( well.. except perhaps me ), and don't expect a minimal 10% or 20% drop, expect 50% drops all over Australia.
Unemployment will rise ( as I said months ago ), and with it, we're in for some heavy duty revamping of the housing market. 50% crash *at least*. ( sydney is already at 35% crash now btw.. , so we're well on our way ).
Scamp wrote:I'm not going to elaborate on why the property market is crashing, suffice to say that it will crash much harder and faster than anyone expected ( well.. except perhaps me ), and don't expect a minimal 10% or 20% drop, expect 50% drops all over Australia.You sound like one of my ex-neighbors I used to have here in WA. He owned a 3×2 house across the road from me and sold it in 2001 when the "experts" believed the market has reached its peak. Because he still owned the banks 30k he got this bright idea to go to work in UK for a 3-4 years, save his dough and buy another house when the house prices would came down a bit in 2-3 years. He sold his place for 149k paid back the 30k and put the rest in a high yield bank account.
By the time he got back in late 2004 the prices for a 3×2 house in the area he used to live doubled. Even with the 100k saved in UK and the 140k in that "high yield " account he was still 60k short of a replacement house. I suggested he'd get a duplex which at the time he could afford or see a bank manager but he knew better. He was going to wait for the property crash and buy with cash at half price from the "greedy property investors who were going to get burnt". He waited and waited for a crash and by the time the prices peaked last year a 3×2 in that area has gone above 450k. Last I talked to him he was still waiting for that BIG crash so he can get back into a 3×2 and in the mean time he is renting some asbestos doghouse on the edge of Cannington under the flightpath of Perth's domestic airport.
I wonder how many more like him are there, returning from working O/S after a few years only to find the house prices tripled and they can't afford to buy a place anymore.Scamp wrote:It's a shame that property investors gone wrong never bother posting here,it would certainly fire up the discussion.Hmmm, and all along I taught that's why you are posting all that G&D here.
cheers & good luck with the house hunting
If public sentiment was that this was a short term blip (base this on inumerable conversations on people post poning selling until the market comes back next month, next year ) and the market went flat, think now that the sentiment moves slightly down it will head down for a while.
On other news unemployment heading up, and some foerign workers will be going home,
my favourite storey is a couple who wanted to put a mill in super last year, and fund it by selling the home.
Home was taking time to get "what it was worth" and fin planner talked them into only borrowing 1/2 mill while they waited for the sale.
Now 1 year later their 1/2 mill has dropped close to 20%, their house is still unsold depsite several drops in price, ( they are paying non deductible interest at 10%) on the loan used to fund their backwards moving super,and their retirement plans have gone bad, real quick.
)
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