澳洲Australia property Sell or hang on?? | Sydney


在澳大利亚 I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo


Hey guys...just after some advice.

My parents own their own PPOR and are paying off an IP. Their IP is a serviced studio appartment in the waldorf complex at Rosehill in Sydney. They purchased it for around 200-220K some years ago and the same appartments in the same complex are selling for 159K now - so value has decreased significantly.

In their defence, the property was not originally purchased to be an IP - they needed somewhere for my brother to live - he would not get out of the house, long story!

Dad wants to sell now, cut his losses and put the money into a better performing IP. There is only about 40K equity available in the property.

After a little research I have found out that Rosehill doesn't have much going for it... the train line will probably never happen.

Dad has been offered 170K for waldorf to buy it back - which looks like a good offer when comparing it to the same appartments on sale now for 159K.

So, should they sell and cut their losses or wait a number of years to eventually get their money back?  

评论
What is the net rental yield after all costs?  

评论
The approximate net yeild is 4.7%, if the figures I have been given are accurate. Dad said the property has been useful in reducing his tax. Thanks for your interest.

I guess the main issue is, should my parents continue to put money in a property that has fallen in value with little prospects for anything spectacular in the future, or should they cut their losses, sell and find a better property?  

评论
there is too little equity left to do anything meaningful with it. their holding costs would presumably be about 2 or 3% and inflation (particulalry true inflation) is running higher, so I would stick it out, continuing to take the tax losses and convert them to the lower CGT regime.  

评论
They should sell it if they have savings that they can also add to the $40,000 and buy something else that has better prospects (near transport, shops etc). $170,000 might the best offer they get for a while? It's hard to make the decision to sell but if they can put the money into another IP it will still be tax effective for them and they won't regret selling. The only thing is the CGT payable on that $40,000?

Hope this helps :)  

评论
The 40K equity is not from capital growth, it's from mortgage repayments - so no need to worry about CGT? They bought the property for 209K and it is now worth about 160K.

I know most property increases in value eventually but, as they are about to retire (next 5-10 years), i thought it may be better to cut their losses and put their money into something that will perform better in the short term.  

评论
FYI these Waldorf Apartments are also in Chippendale and sell for $100k under the market. It would appear the managment fee/set up kills any gain. I know of similar in Ultimo also good rent but no CG.

If Chippendale/Ultimo almost CBD is a dud then there is little hope for Rosehill, train or not IMO.

Regards

Peter 14.7  

评论
Sorry I think I read your post too quickly! At least they can claim their capital losses at tax time. There must be something that will perform better than that property. I have an IP in Hervey Bay that has done nothing for 2.5 yrs and if it wasn't on a fixed int rate I would be selling, even if it meant a loss! Hope your parents make a decision they are happy with. :)  

评论
So why dont these appartments grow in capital?? Is it because serviced appartments are not in demand?  

评论
happy said: ↑
I know most property increases in value eventually but, as they are about to retire (next 5-10 years), i thought it may be better to cut their losses and put their money into something that will perform better in the short term.Click to expand...
Happy, have your parents got other properties or assets? (Shares, super, cash) If so, would it be worth while just having them pay this one down over the next 10 years, and then using it as another income stream when they retire?

The way I see it - they may sell now, and effectively loose $40,000 plus the initial buying and selling costs. Secondly, if they sell and buy something else they are up for another lot of stamp duty (unless they buy off the plan) and other associated costs - and there is no guarantee that what they buy will increase in value either!

So in effect they may loose money on both deals! :eek:

If this one rents well - then perhaps working out ways to be able to increase the rental return may be more effective than selling. (eg renovation, self managing the apartment and catering to specific clientel etc)

Regards Jason.  

评论
Thanks Jingo, that's great advice!  

评论
Retiring that soon? Sell and put the proceeds into super. Who needs an albatross around their neck?

Note: I don't know much about super but there are plenty out there who do. :)  

评论
Hi Happy,

The approximate net yeild is 4.7%, if the figures I have been given are accurate.Click to expand...
4.7% of which value??

bye  

评论
4.7% income based on a purchase price of 209K.... but I just reliased I forgot to factor in the buying costs. Thanks for picking me up on that!

It's more like 3.7% net yield and a fall in value of about 50K - so absolutely dismal.

I just found out that Waldorf have not increased the rental return for dad for the last 3 years!! I'm sure they have increased the rent they charge their clients though. They are advertising these appartments for rent for 385 per week and dad is getting only 260 per week. So for the privilage of Waldorf 'managing' his property, dad pays over $100 per week!

Dad is extremely risk adverse and likes the fact that Waldorf guarantees rent every week, but this is ridiculous.  

评论
$260 p.w on a purchase price of $209K is a gross yield of 6.4%

What are the expenses of having the unit - body corporate etc?

If the investment is performing poorly and this is likely to continue into the future, your parents may be better to take the capital loss and reinvest the proceeds in what will they expect to be a better performing investment eg if Rosehill is expected to increase 3% a year, an investment with growth of 5% a year will easily outstrip trying to sit and recover your losses

Can you get an estimate from another agent on rent?  

评论
I think we need to know if Dad is obliged to let through the company.

I looked at a good serviced apartment once that was well below replacement cost but the restrictive conditions (15 yr lease back) limited the rent rises to CPI but the marketing company took what the market could bear. With such a lease, there was no cap gain over CPI possible.

If it is cf + and any lease back doesn't have too long to run, it may be best to hang in there.  

评论
I have a couple of serviced apartments under a similar arrangement. There are a few questions that have to be asked:
1) What is the term of the lease between Dad and Waldorf? What happens once the lease ends? Often, at the end of the lease these type of apartments revert to being standard residential units, at which time their value increases substantially. Is this the case here?
2) Does the agreement between Dad and Waldorf require leasing/rental via the Waldorf management? Is it possible to lease the unit independently?
3) How often is the rent reviewed? This should be in the lease agreement. Who conducts the review?

These units can sometimes be a blessing in disguise, especially where the lease arrangement is such that lease termination means reversion to standard residential unit. If this is indeed the case, how long would Dad have to wait until the lease finishes, and how much do similar residential units sell/rent for in the same area?

Let us know how you go. Best of luck and feel free to ask more questions if need be.:)  

评论
VYBerlinaV8 said: ↑
I have a couple of serviced apartments under a similar arrangement. There are a few questions that have to be asked:
1) What is the term of the lease between Dad and Waldorf? What happens once the lease ends? Often, at the end of the lease these type of apartments revert to being standard residential units, at which time their value increases substantially. Is this the case here?
2) Does the agreement between Dad and Waldorf require leasing/rental via the Waldorf management? Is it possible to lease the unit independently?
3) How often is the rent reviewed? This should be in the lease agreement. Who conducts the review?

These units can sometimes be a blessing in disguise, especially where the lease arrangement is such that lease termination means reversion to standard residential unit. If this is indeed the case, how long would Dad have to wait until the lease finishes, and how much do similar residential units sell/rent for in the same area?

Let us know how you go. Best of luck and feel free to ask more questions if need be.:)Click to expand...
Thanks for your interest guys...

I have since found out that dad is not under a contract to do anything with Waldorf - they are simply managing the unit and guaranteeing weekly rent. His contract with them ran out long ago and now he is free to do what he likes with the unit.

Dad says he gets about 6-7K tax break from the unit. I have estimated that if he takes over management of the unit and earns an extra $140 per week (approx what Waldorf takes in management fees!), he will earn an extra 6-7K per year.

So, is there an advantage to trying to increase the net yield by managing the property himself, if he looses the tax break? The way he sees it is, he can either take the shitty rent and the good tax break or, manage it himself (includes extra work, worry etc), make more money, but loose the tax break.

If he sells the property now he will loose around 50K. He obviously doesn't want to do that. Financially, he can still afford to buy property without having to sell this one - so it's not limiting him in any way.

So what would you do if you owned this IP? Are there any more creative ways to improve it's performance? Or should he get out of it now, take the 50K loss on the chin (should include a great tax advantage?) and put his money into something better?

Thanks again!  

评论
BTW, the rent is no longer reviewed and has not been increased for three years. Dad said Waldorf would probably tell him no if he asked for a rent increase.  

评论
Hi Happy,

At $260 a week net of fees is a yield of 7.9% on what the property is worth, $170k. The initial yield is not worth considering at this stage as it is past history.

You need to look at the numbers accurately before taking any action.

bye  

Property Investment

Australia property Selling Hints | Sydney

澳大利亚Hi folks I recall ready somewhere about what are some simple tricks for making your place more attractive during a home open. Im seriously thinking of selling my little pad and want to maximise my efforts. Any hints greatly appreciated. 评论 ...

Property Investment

Australia property Re-zoning | Sydney

澳大利亚What would the chances of a NSW Local Council allowing a community titled development (homes, community buildings, etc) on an area zoned Protected Agricultural land? Does anyone have experience in this area? Looking at the local council LEP, ...