- Blessed happyParticipant@blessed-happyJoin Date: 2012Post Count: 4
Please find I am seeking your wise advice about whether I should sell the following property or hold it? If I shall sell it, how can I not make a loss in the down market please?
Property type: Detached House with 4 bed rooms; 600 sqm land
newly built in 2009
Area: Sandstone lake, Ningi, Sunshine Coast
purchase cost: roughly 450k
I have been holding this property for 3.5 years. It is negatively geared and I need to pay net AUD 6000.00 per year as the holding cost.
Since the local market has been flat for the last 3 years, I am thinking about sell the property.
If you were me, will you sell the property? If so, what would be your best selling strategy please?
Thanks & regards,
BlessedhappyNigel KibelParticipant@nigel-kibelJoin Date: 2005Post Count: 1,425
I believe that Brisbane will just to move solidly in 2013 and although secondary markets will follow I would recommend that you consider selling the property and buying something in a more solid capital growth area. Stick to 10 but preferably 5km from the Brisbane CBD
Clearly first you should consult with agents as to how much our current property is worthTheFinanceShopParticipant@thefinanceshopJoin Date: 2012Post Count: 1,271
What's the plan if you sell the property? i.e. is there a better deal out there?
What are your capital growth projections for the next 5 years? do they outweigh the loss you are currently incurring?
ShahinJamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
You just need to look at the opportunity cost.
For this to be a worthwhile investment, it's going to need to go up in value at a rate higher than the cost of holding it. It doesn't sound like that you're overly confident that this might occur.
I'm a bit of a boring buy and hold type of guy so I generally try to avoid selling anything – but if it's a dud investment and the funds could be utlilised better, then so be it.
JamieKylieJSMember@kyliejsJoin Date: 2012Post Count: 2
Do you have any equity in it? you could try selling it and helping a buyer out with part of their finance using that equity, charging them a couple of percent over the market rate, and spreading payments over a time frame that works for you both (you might also be able to charge a slightly higher price for the property). It would work with a buyer who couldn't quite stretch to the full amount. It might help turn a negatively geared property into some positive cashflow for awhile for you while you wait for the market to pick up more, or decide where you are going to buy.
By the way, we had a lemon in NZ that was brought as a PPR, but turned in to a second investment property when we moved to the US. It was costing us over $8000 a year. We just cut our losses and sold it. Our money was much better off being invested for a good return, and it was going to cost us far more than we were going to ever get in capital gains.Paul DobsonParticipant@pauldobsonJoin Date: 2003Post Count: 1,196
During periods of negative to low capital growth a lot of people have been 'taking a bath' on their residential IP's. That's not to say that capital gain won't return but we've started to chase positive cash flow a lot more these days than capital gain.
We've been doing this by converting some poorly performing IP's to positive cash flow, by selling them with vendor finance. We call it our negative2positive process. Our website at http://www.negative2positive.com.au is there to promote our N2P service but it's got some good free information there, to get an idea of what it's all about.
Cheers, PaulBlessed happyParticipant@blessed-happyJoin Date: 2012Post Count: 4
Thank you so much for your kind and wise advice!
I am very interested in knowing "Lease Purchase" and "Vendor Finance".
However, I find it is not easy to do the calculations, especially not easy to find a "Win Win" situation to benefit the buyer and myself. E.g.: Since I purchased the property at about 450k, the current rental is AUD335/ week, why would the tenant want to pay extra AUD 120/week (I am paying net AUD6000.00 per year as the holding cost, so AUD6000/50week= AUD120/week to make the property break even)?
The local market is flat at the moment, if I set the selling price higher than 450k, how can I attract buyers since the selling price is much higher than the other similar properties in the same area? If I sell the property lower than 450k, I am going to make a loss which I won't be doing…
Appreciated if you could give me some thoughts- I believe it will be very valuable to me!
Thanks again all for your wisdom!
BTW, thanks Paul, I will check the website!
BlessedhappymattstaParticipant@mattstaJoin Date: 2011Post Count: 604Nigel KibelParticipant@nigel-kibelJoin Date: 2005Post Count: 1,425
I agree with you prices will start to rise soon however I am convinced the strong growth will be in Brisbane. So you have to look at the opportunity cost. If you sell and buy especially in a suburb within 5 km of the city center how is that likely to perform over the next 5 years compared to the Sunshine coast.Gazza21Participant@gazza21Join Date: 2012Post Count: 54
Can you increase the rent? Or make any improvements that will justify a rental increase?
Can you refinance or do anything else to reduce the holding costs?
If there’s nothing you can do to improve the situation, I’d suggest having 3 rea’s value the place and work out what it will cost to sell. Work out exactly how much you’ll get out with, apart from the saving you’ll make each week.
Then have a good look around imagining yourself as a buyer with that money and see what else you could achieve with it.
I realise you’re probably off setting that loss against your tax bill but personally I wouldn’t ‘invest’ in anything that takes money out of my pocket each week! Find something that pays you..?gmh454Member@gmh454Join Date: 2003Post Count: 537Nigel Kibel wrote:Hi Mattsta
I agree with you prices will start to rise soon however I am convinced the strong growth will be in Brisbane. So you have to look at the opportunity cost. If you sell and buy especially in a suburb within 5 km of the city center how is that likely to perform over the next 5 years compared to the Sunshine coast.
Considering the flood issue that looks to now be part of the Ipswich Brisbane experience what sort of effect do you think this will have on the Brisbane market,