Hello All,
I’d like some advice on what you’d do in my situation. To hold and ride it out, or cut losses and sell.
I have a property in the Mackay Region (Armstrong Beach) that has steadily been declining in both value and weekly rent. Its has dropped to the point that selling now I would incur a loss of $100K or more. The property is and has always been tenanted however with the declining rent is now negatively geared to the tune of around $15K per annum.
I have generally adhered to the long term buy and hold investing strategy, which has got me to this point. Part of our contributions towards servicing the loan/property are offset by other positively geared property, the rest we can service through other income.
So my crystal ball question to you is would you hold or would you sell?
I’m a little lost on this one so thanks in advance to anyone who can offer some advice.
what is your prediction for Mackay Region prices? Going down in next 12 to 24 months, neutral, or on the rise in next 12 to 24 months?
Andrew Pitt
Enhancing Commercial Property to Empower Business
Hi Adam,
It doesn’t make a lot of sense to make a decision based on what has already happened, if anything it should be easier to decide to sell at a loss as you receive a future tax benefit rather than a liability if sold at a profit. I strongly suggest that you make a decision as to what the future holds for the area and how holding the property effects your ability to invest elsewhere. How does it effect your:
1. Borrowing capacity
2. Cashflow
3. Does it tie up capital that could be better deployed elsewhereOnce you’ve weighed up these factors, your decision should be pretty clear.
Regards
Hi Alistair,
if anything it should be easier to decide to sell at a loss as you receive a future tax benefit rather than a liability if sold at a profit.
By taking a loss it allows you to offset a future capital gain…. is that what you are meaning? I must admit I had never thought that way – my kneejerk reaction was that a $100k loss meant a Bank would be chasing you down for an unsettled mortgage (or a Mortgage Insurer if not the Bank).
But, can it be that one can “sell at a loss” without actually being short of $$ on paying off a mortgage? Or is that an impossibility?
If the latter, HOW does one SELL without inviting further disaster by inviting Mortgage Insurers to the going-away party? Or am I missing something else? If so, I’d really like to understand….
Thanks in advance,
Benny
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