Hello Friends,
This is a great forum and lots of good information. Hoping to get some help on my situation as well.
Late 2009 bought a property (Townhouse Unit) for $400k in Bayswater, VIC
Today's situation – Plans to move to Eltham, VIC. But based on the numbers, we cannot Buy in Eltham by topping up the Bayswater loan as there is still a shortfall of $30k (the houses that we liked in Eltham are for $550k plus).
Hence, we will have to rent out in Eltham
What is the best way forward – Rent or Sell the Bayswater home?
Factors being considered –
- Offers coming on Bayswater home ~ approx $440k
- Rent coming on Bayswater home ~ approx $380 pw
- current mortgage $360k
- Eltham rent ~approx $430 pw
- Wish to buy in Eltham within an year or so ~ approx $550k
Whats the best option –
- Rent Bayswater and Rent Eltham (Sell & Buy – after an year)
- Sell Bayswater and Rent Eltham (Buy within next 6 months)
- Rent Bayswater and Rent Eltham (Buy after 2-3 years after accumulating more cash base and hence keep Bayswater as PI).
highly appreciate your help.
Thanks!!
AJ
Hi AJ,
Has Bayswater peaked? Do you think you can pretty much get top dollar at this point and get out with a good profit?
What condition is the TH in? Is it still in almost brand new condition? Have you talked to an accountant to see what kind of depreciation you can get? This made add more dollars into your pocket.
Bayswater is always going o be a good rental suburb, plenty of working people, train line, schools, new supermarkets, nice new apartments going up, plenty of new development turning over the scabby old stock. Re-gentrification is a lovely thing.
The main thing is to do the numbers, will Bayswater be neutral or positive cash flow, if not will it suck so much money out each week or month that you can't get into the Eltham property? It's going to come down to how much money you can afford to put towards the Bayswater property. If it is not cashflow positive or at least neutral you will be speculating that you may have a capital gain, can you afford to speculate?
As far as Eltham goes because it will be your home, you'll probably want to buy, do you know the area, is there particular pockets you want to buy into, have you lived there before? The good thing about renting when you first get into a suburb is you get to discover the area, really discover. You find out how quiet or noisy it is, or that you may like to be a bit closer to the shops, once you buy, you have to like what you have bought.
I can't tell you what to do, but I hope this gives you some more questions to ask yourself to help make a good decision.
Good luck!
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeHi AJ,
If you decide to rent out Bayswater, your property will be negatively geared. Using your figures, the interest on your Bayswater loan (using interest only which is what it should be if using it as an investment) would be about $395 per week at todays rates.
By deducting expenses such as management fees, rates, water, insurance, etc from your rental, you will get an accurate picture of how much out of pocket you will be. Of course some of this along with depreciation may be recouped come tax time.
As Derek mentioned, do you think that future capital gain/rental will make it worth sticking with, or will it be better to put that money elsewhere now?
I know it's difficult to foresee what may happen in 2-3 years time with your finances, but there is also the question of serviceability and whether you are able to service both properties ($940K+ if you're looking at also borrowing stamp duty costs, etc) if you decide to go down that path.
Cheers
Tom
As mentioned before you need to decide your future profit from renting or selling in the future will be worth it.Also, make sure that you can afford both properties and able to maintain them.
Thanks everyone!! This was great help.
I did conclude that if the Bayswater house is sold at a god price (Bank Valuation came as $420k – so expecting more than $450k), then we will sell… and work out to buy somethig in Eltham.
If it is not sold before Chirstmas, we will rent it out and we will move on rentals… try and save bit more to build cash reserve to buy something in Eltham by end of this year… (hoping that the property market is still low by then and we are able to hop on before it starts to pick up.
I ended up drawing a flow chart with lots of if and else conditions and then trace my way to the best possible outcome for each scenario.
Thanks a lot. You guys gave me some real good insights.
God Bless!!
Amod
PS – I will try to come back and update the actual result that comes out.
Good on you Amod!
Keep us posted, sounds like you have a plan!
Cheers
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeWhen ever you take a decision think more then one time. because after take decision you can't think about to change it.
Check total agreement or you can hire a agent to do these all process.
AJ, just make sure when Christmas comes around, that if you still have the Bayswater property, to restructure your loan to give you the maximum benefit both deductibility wise, and saving for that Eltham property.
Cheers
Tom
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