Forums / Property Investing / Help Needed! / Advice Needed – Sell or Rent

Viewing 15 posts - 1 through 15 (of 15 total)
  • Profile photo of Sam80Sam80
    Participant
    @sam80
    Join Date: 2010
    Post Count: 9

    Hello Everyone,

    Just after some advice, we are still learning. We have 1 investment property we bought just over 2 years ago,for my brother & his wife to rent. We spent about $1,500 to get the place neat tidy for them. They have recently moved on & we decided to repaint the entire house & make some cosmetic changes. We spent about $2,000 this time & thought we would try to sell (keeping in mind that the interest is costing us about $2,200 a month without rent).
    The house is a 4 bedroom, 2 bathroom brick veneer about 12 years old in the southern suburbs of Adelaide. We enlisted an agent to sell it with a price bracket of $385,000 – $395,000 (based on agents advice). The mortgage on the property is $375,000 so we needed about $385,000 to break even with agent fees & advertising. We had it advertised for a month with numerous open inspections but no offers so we changed the price to $375,000 – $385,000. Another 2 months went by with little to no interest (no offers) so we decided to cut our losses (About $2,000 agent fees & advertising) & try to rent it.
    Signed up a property manager to find tenants & manage the place, weekly rent of $380 including garden maintenance. Has been advertised for about 2-3 weeks now with very little interest & is still costing us too much. I have had to pick an extra day of work, 6 days a week & completely change our lifestyle to keep up the repayments. The property manager has told us that there is a influx of rental properties at the moment because all the investors that have tried to sell havent been able to so they are trying to rent them ,go figure. We considered selling so we could free up some cash flow to finish our own house & pay the mortgage down asap, then look at buying a more neutral/positive geared property. Do we lower the rent & keep slogging away or sell & take a loss? Any help would be greatly appreciated.

    Profile photo of KlahKlah
    Member
    @klah
    Join Date: 2010
    Post Count: 40

    If you rent the property out you are still short $620 a month from my rough calculations. If you are unable to cover this expense and other outgoings then you NEED to sell. Even if you loss $10,000 on the sale the repayments on the loss will be less than having to cover the short fall on the property (example 10% interest on $10,000 = $100 a year instead of $620 x 12 = $7440). Cut your losses and sell!

    I would also be look for another agent and definitely not paying any advertising. All the best.

    Profile photo of colinnewlandcolinnewland
    Participant
    @colinnewland
    Join Date: 2006
    Post Count: 128

    Ask the bankl for a rate reduction…they are actively competing at the moment.
    Ask for a 'professional package…that will get you at least a 0.5% reduction.
    You can turn a negatively geared property into a positively geared property with a little imagination.
    This sounds like a perfect opportunity to use a rent to buy scheme where you rent the property to an end buyer.
    You usually rent with an option to buy to a buyer that may not fully qualify for a standard bank loan at a figure above the standard market rate.
    You can also get them to add value buy adding value to the property with their labour in an effort to increase the valuation of the property.
    You can get them to put down a substancial non-refundable option fee (that ensures that they are serious) with an option to buy within a stated period of time (say 3 years) at a fixed price. The rent will be at a rate at say 1-2% above your mortgage rate.
    You get the fee as an instant profit.
    You also get the 1-2% (on the full selling price) as your profit.
    Your mortage is fully paid out every month.
    You also do not pay a REA $10,000 so that also stays in your pocket.
    They get the option to purchase a home at a stated price sometime in the next 3 years.
    They are looking to have the property increase in value above the agreed selling price; this will allow them to use that as their 'sweat' equity, as part of their deposit. They doo all the work, providing expensive labour (themselves, family, friends doing all the heavy lifting). Have 3 quotes done for each of the jobs needed doing and ask the a valuer to value the property 'on completion' of the renovations/improvements. Focus on adding value in the kitchen and bathrooms and adding living spaces in the back yard (pation, pagola etc).
    The banks are looking for at least 10% in equity and at least 12 months of regular/on time rental payments.  If they are able to pay above the current bank interest rate for at least 12 months, the bank should provide a loan, especially if the value of the property has climbed above the selling price, adding to their equity/banks security level. 
    Remember, you do not sell a 'home' on price, you need to sell on emotions.
    Dress the house to look like a home, show the potential as a family home.

    Why did the agent get any fee when the property did not sell; they only get a commission on a sale not of a 'nice try'?
    And $2,000 sounds like a lot for advertising for just 2 months….RE.com usually charges less than $400/mth for an add and the REA gets a LARGE discount on that price.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    Sam White wrote:
    Hello Everyone, Just after some advice, we are still learning. We have 1 investment property we bought just over 2 years ago,for my brother & his wife to rent. We spent about $1,500 to get the place neat tidy for them. They have recently moved on & we decided to repaint the entire house & make some cosmetic changes. We spent about $2,000 this time & thought we would try to sell (keeping in mind that the interest is costing us about $2,200 a month without rent). The house is a 4 bedroom, 2 bathroom brick veneer about 12 years old in the southern suburbs of Adelaide. We enlisted an agent to sell it with a price bracket of $385,000 – $395,000 (based on agents advice). The mortgage on the property is $375,000 so we needed about $385,000 to break even with agent fees & advertising. We had it advertised for a month with numerous open inspections but no offers so we changed the price to $375,000 – $385,000. Another 2 months went by with little to no interest (no offers) so we decided to cut our losses (About $2,000 agent fees & advertising) & try to rent it. Signed up a property manager to find tenants & manage the place, weekly rent of $380 including garden maintenance. Has been advertised for about 2-3 weeks now with very little interest & is still costing us too much. I have had to pick an extra day of work, 6 days a week & completely change our lifestyle to keep up the repayments. The property manager has told us that there is a influx of rental properties at the moment because all the investors that have tried to sell havent been able to so they are trying to rent them ,go figure. We considered selling so we could free up some cash flow to finish our own house & pay the mortgage down asap, then look at buying a more neutral/positive geared property. Do we lower the rent & keep slogging away or sell & take a loss? Any help would be greatly appreciated.

    Hi Sam

    Sorry to hear of your situation.

    I'd call a couple more property managers and ask for their take on the current market and whether they are having troubles renting them out.

    As Colin mentioned above, it's also a great time to negotiate on your current loan as banks are fighting very hard at the moment to keep their market share – and expand where possible. To put it into perspective, we're are organising rates of 6.8% with ANZ at present (depending on the deal) and they are also covering the costs of refinancing to them (up to $1k).

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Hi Sam,

    This is a very common problem. I had the same problems with a property i had in Melbourne. I worked in real estate and last year i started to notice the market really slowing down so i sold and just broke even.
    There are alot of homes out there on the market and alot of homes out there to be rented. What can you do!!

    1) Take your home of the market for one month – You have to make a firm descion on your either going to sell it or rent it.
    2) Doing both will confuse any buyers out there
    3) Go with a new agent and cut your losses. In life we make and we loose money but more importantly its the lessons we learn from it.

    Im in the same boat again with a bussiness we own. My wife runs the shop and we have it on the market there is plenty of buyers out there but not much banks willing to lend.

    The market place is going through a tuff time but stick to your guns for some reason in Australia we tend to worry about Money to much. We loose focus on everyhthing else.

    Worry more about learning and results will come.

    If you need anything please PM me.

    Cheers

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of adimisadimis
    Participant
    @adimis
    Join Date: 2007
    Post Count: 7

    Sam,

    Sorry to hear of your predicament.

    If you thought it was a good deal to rent to family, and cover the difference in the shortfall.
    Then I can only assume that you would still think Its a good idea to rent at a reduced rate, and again cover the shortfall.
    I understand the place is negatively geared, but are you also claiming depreciation?
    There may be about $3-4K in that extra per year.

    At the end of the day 2 years in property is typically not going to gain you massive returns.
    There are exceptions, but not a standard deal of this nature.

    I say if you are happy to grid it out then by all means continue to collect the rent.
    I know for a fact that rents will increase over time and your mortgage will most probably decrease.
    Then when property prices bounce back you can always sell at  the profit you were hoping for.

    For mine, if you enter a property deal like this, over such a relatively short period, the only people you can expect to profit are the agents, lawyers, banks and government with their duties.

    It will all have to do with how keen you are to grind it out?
    If I entered this deal with the same thoughts you had, then I guess I'd probably choose to grid it out.

    Profile photo of adimisadimis
    Participant
    @adimis
    Join Date: 2007
    Post Count: 7

    PS: Definitely, find yourself another agent… 

    Profile photo of Investment GuruInvestment Guru
    Member
    @investment-guru
    Join Date: 2011
    Post Count: 3

    Hello,

    Your situation is really on the rocks right now. As all the others have been suggesting, I also think you should sell. An immediate solution will be to find another agent that will really help you heart on.

    Best regards

    Profile photo of xdrewxdrew
    Participant
    @xdrew
    Join Date: 2010
    Post Count: 479

    Two mistakes you are graduating to and both are fixable.

    You are moving WITH the crowd and not against it. You've found it hard to sell .. and so has everyone else .. because .. there arent the buyers out there now. You've moved with everyone else. Thats a recipie for trouble.

    So you follow it through with sticking the property on the market. At the same time as everyone else (see above) who didnt manage to put their property on the market. And guess what? In a market glut .. your property price may not be matching market.

    Its going to be a series of tough times coming up. Not getting people in at $380? Put the property up on the market. Allow the tenant to make offers on the property for rent. GET SOMEONE IN TO PAY YOUR BILLS. Thats what you need.

    Rethink your 380. You dont need to make your place the cheapest on the block. You need to get someone in. And once they are in and happy THEN you can raise rents on them gradually. But you need to make your investment work. And doing extra shifts for a house you cant sell .. its a burden around your neck. And thats not what property is about.
     
    Forget your sales efforts .. if there arent any buyers you are pissing ad money into the bin. And getting the agent to lower the property price on you. So you'll end up frustrated .. selling your property short .. and hating your real estate agent in the same breath. Which is not a good recipe for continued property investment.

    In the property clock .. we are hitting the DOWN cycle. Its ok .. it doesnt last forever. But it means for a brief period .. people will have no money to flash around. Thats going to affect house prices and rental prices (rents not so much). But it does mean you want to secure tenancies on 12 month leases NOW while there is still some money floating around.

    Profile photo of Sam80Sam80
    Participant
    @sam80
    Join Date: 2010
    Post Count: 9

    Thanks for all the advice guys I will take it all into consideration.
    Cheers

    Profile photo of ChristinaMChristinaM
    Participant
    @christinam
    Join Date: 2010
    Post Count: 34

    I read this thread, because I am in a very similar situation.
    My property is in the market for 4-5 weeks and has only one offer, an offer that's 10% lower than our break-even number.

    It's easy to say "cut the loss short and move on" while you're not in that situation…
    For us, we're going through so much paid making a decision on wether or not we should take the offer and recoganise the loss.

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Hey guys

    We have all made losses. Its not easy no one said it is. But in bussiness we cant always win. Investing is not just for people who want to win. Its about learning.

    If your painting a room and you fall of ladder what do you do? You get back on the ladder and start painting again. 
    Turn this loss into a lesson and turn this lesson into making money in another venture.

    Cheers
    Joahnn 

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of xdrewxdrew
    Participant
    @xdrew
    Join Date: 2010
    Post Count: 479
    ChristinaM wrote:

    I read this thread, because I am in a very similar situation.
    My property is in the market for 4-5 weeks and has only one offer, an offer that's 10% lower than our break-even number.

    It's easy to say "cut the loss short and move on" while you're not in that situation…
    For us, we're going through so much paid making a decision on wether or not we should take the offer and recoganise the loss.

    And yet sometimes you have to to realise and sell. Either you cant make the payments .. the property is becoming a liability or is headed to becoming an expense … the property boosts your land tax scenario enough that it makes the rest of the portfolio unviable.

    The answer to the question lies in the wait period. At this stage for the property to turn around into an upwards movement again will take betweeen 4 to 8 years. At most of that period its going to sit flat .. not going much anywhere. Its a period where you may find it easier to take the money elsewhere. Ride it out and you'll be ahead. As long as your judgement call for the purchase was sound in the first place .. you should be able to realise something like profiit at the end of this period.

    We reached the stage about 3 years ago where every nut who could pick up a hammer thought he could make his fortune in doing up a property. Thats been curtailed .. but for the right reasons.

    In a hot market .. people will pick ANYTHING. Good .. bad or ugly. In a market that is being reassessed .. the properties that were good to start with will prevail. Whether its position .. opportunity .. location .. they'll stand out from the pack. Because they had the right qualities to start with.

    Profile photo of ChristinaMChristinaM
    Participant
    @christinam
    Join Date: 2010
    Post Count: 34

    Thanks both for your replies.

    The reason we want to sell is

    1.we need to upgrade our family home (just had a son and maybe in the next a couple of years, we'll have another one).

    2. Our current home is too far from the city where we work. Working full time, trying very hard to advance in our career, having a child under 1 year old, commuting >4 hours a day between us, doing chores and everthing are just too much for us to handle. So.. a solution to this is to live somewhere closer to work and save 1 hour a day per person.

    3. For the majority of people, the family home is our largest asset. From this point of view, we need something with better growth potential (larger land, closer to the city).

    After we sell, we'll have to buy straightaway to have a place to live. Although in a market like this, we can buy at a lower price. But it doesn't lessen the pain of selling at a loss.(a huge loss in fact, > our a year's savings!)

    Profile photo of adimisadimis
    Participant
    @adimis
    Join Date: 2007
    Post Count: 7
    johann22 wrote:

    If your painting a room and you fall of ladder what do you do? You get back on the ladder and start painting again. 
    Turn this loss into a lesson and turn this lesson into making money in another venture.

    Cheers
    Joahnn 

    Joahnn,
    If you fall off the ladder painting a room you normally clean up.
    That is where we find out pundit.

    It appears as though our esteemed college has other motivations for needing to sell.
    The gent is trying to look after his family.

    Perhaps this means, you may need to clean up first before climibing that property ladder.

    I can't tell you what to do, but when our situation was similar, we chose not to have our PPoR as our largest investment, in fact it was only the 3rd. Perhaps you may consider a similar strategy, I know it isn't as glamorous, but I also value my family.

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