I am relatively new in property investing. I got into it on recommendation of a friend of mine and bought a property in Manoora (Cairns) QLD three years ago. It’s a 2 bed/2bath/1 car park, resort style unit, fully furnished, bought for 267K. Initially rented for 305/week, now only 275/week. The price has gone down to about 225K. The outgoings are about 7K a year. As you could see, the property is bleeding me dry and has significantly affected my borrowing capability, if I had wanted to invest more in properties. The only thing that’s keeping me afloat is a sizable depreciation I can claim as the property is about 5 year old.
Is there anyone who could advise, what and how could I deal with this property, any ideas welcome.
Many thanks in anticipation,
SidducksterParticipant@ducksterJoin Date: 2004Post Count: 1,674
I cannot advise to but have a look at these link for information and get some advise from a lawyer or financial planner on if it suits your situation
Thanks duckster, really appreciate your quick response. I had thought of vendor financing but as mentioned before I am not quite educated on these options and what qualification (such as license) are required to enter into such transactions. Is there a bunch of legal documents that I could buy from anywhere for both parties to execute. Same for the lease options. Where do I learn on these and most importantly, the paperworks needed.
Many thanks again.Jamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
If cashflow is an issue you could look into the ATO PAYG variation form which will allow you to pay less tax each pay rather than make a large claim at EOFY.
Jamieluke86Participant@luke86Join Date: 2010Post Count: 470
You could sell the property, take a hit and move on with a lesson learned?
If you can't afford to sell the property and take a $50k hit then you are probably not in a position to invest in an additional property so I wouldnt think that this would negatively affect your ability to purchase more properties.
LukeFreedomThruPropertyMember@freedomthrupropertyJoin Date: 2012Post Count: 13
There are certainly plenty of better property deals out there than the one you described in your current IP. I can’t advise because I don’t know enough about your situation and goals. However, I can tell you that one of my first IPs turned out to significantly impact my cash flow and inhibit my ability to expand my portfolio. The best option for me at the time was to sell it, take the hit, and move on to better opportunities.
Education is the key – the best advice I can give is to learn what other opportunities are out there, how you can access them, and how they will affect your financial goals.
KrisTaylorChangParticipant@scha9799Join Date: 2009Post Count: 234
when you look into vendor finance. just be very careful the potential risk.
it may turn your negative gearing propety to positive gearing property, However, if the purchaser default, or any legal issue arise it will be very painful in term of cost involved in legal, your ineterest loan payment, rate default your credit damage……….
you need to find a right and suitable person to purchase not just anyone how "seems like" good purchaser.
I am also in the similar situation, but my property is in the city area so captial appreciation is there just need to wait for a while.
but in your case, you also have to think about how to help your purchaser to get out of the loan and get a proper finance..
WomeninPropMelbMember@womeninpropmelbJoin Date: 2008Post Count: 234
I am not sure what you mean by the “price has gone down to $225K”?
Do you have comparable property analysis around you? How can you know that?
Are there other options available to you? Like can you furnish the unit – you can get second hand furniture – and rent it for holiday rental for higher? Cairns has had a lot of development over the time for holiday makers so you should be able to make it work.
Is it near things?
How is your agent?
From what I saw visiting many times to attend conferences – they built a big conference facility and the tourist demographic improved significantly.
You could sell it – or it you can hold out til the market improves – sell it then and move on. For mine – I would hold on until it improves at least- even in Summer.
Can you check seasonal variation in values? Say on RP data_ Some of the other posters here might be able to help you with access to residex but I am not sure if they provide seasonal variations………….
Good suggestions, all noted. The prices of similar properties listed in domain.com.au is from 200K to 225K. If I want to sell, then I will have to do that at a substantial loss. Agree that the loss could be recovered from another better investment, but that's another risk I am unwilling to take knowing how market is behaving for last few years.
The unit in reference is already furnished with furniture, fridge, MW oven and some outdoor furniture.
My agent is OK, not sure how could be of any help if that doesn't make any commission for him!
Wondering if anyone has any suggestion if I could do rent to buy, that would have recovered some of my costs and free up some of my cash. Is that area (Manoora in Cairns) a good one for such positioning, would people be interested to rent to own.
Cairns is apparently holding G20 finance minister's conference sometime this year, but it is unlikely to push the market price in short term unless significant event happens that fundamentally change the local economy there.
SM.InvestigatorMember@m.investigatorJoin Date: 2012Post Count: 134
If you use a property manager, you could ask them about the demand for rent to own. Or if you don't have one now or even if you do have one now, do ask around with other property management services around your area. They will help you out with some ideas especially if you give the explanation that you would probably go with their service if they are helpful. They are very knowledgeable about the demand.
Another good way to see if there is any demand for it is to start advertising that you are offering rent to buy. This is the only real way that you can measure to see if there is demand. It shouldn't cost too much to do the advertisements, and if you do get interest, and a tenant under those terms then it can help your situation, so it may be worth a try.