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
I would welcome any advice at all, tax, strategy, reassurance, anything you have to offer as I am struggling with a decision.
We have 3 IPs. One in Canberra is our cash flow, around $6k a year after all expenses and low geared owing $127k returning $400 pw about to go up to $425 to meet market so it will be even better. Followed by Perth around $2k positive, $277k owing returning $550 pw. This is all negated by Hobart which is negatively geared by nearly $10k where we owe $350k returning $390 pw.
We have lived in each house as our PPOR during the majority of capital growth so CGT is not a real issue and all are in our own name. Essentially no capital growth on Hobart and it is not performing, plus the future of capital growth does not look good either. I am giving serious consideration to selling but Hobart is very soft at the moment and would have to discount to get the sale. We are buy and hold with a long term view so it goes against our strategy but then you have to adjust.
We really don't know what to do as we have an eye on a development in Melb . Do I sell the under performer or free up some cash by selling Canberra. Is there any tax advice or a change of strategy required? Thoughts on each of these markets?
For the 'development in Melb', do you mean purchasing a development site or buying an OTP property?
If I was in your situation and wanting to sell one of these three. I would sell the Hobart place.
This will effectively give you back your $10K p.a. cash flow. And you can then use the equity you already have in the other two to launch into a better performer.
The Hobart one is losing money and little prospect of growth. What is the opportunity cost of keeping it? Think in terms of extra borrowing capacity, release of funds for further investments, freeing up $10k pa etc.
Thanks.. so far you are confirming my thoughts on selling Hobart.
Just to clarify the development would be a duplex/triplex townhouse development that we do ourselves or JV not OTP.
Paul j F said: ↑
We have lived in each house as our PPOR during the majority of capital growth so CGT is not a real issue and all are in our own name.Click to expand...Did you do valuation when you moved out?
Is that nessasary to get the valuation done if you want to allocate the bigger portion of capital growth to that period? Or can you simply look the suburb growth and apply that to your house.
I would personaly look at the tax situation (-ve gearing) together with the future prospect. That needs a bit of Excel skills
why would you keep a house that is costing you and hadnt had and doesnt look like it will perform...?
sell hobart asap
I tend to agree with the approach on selling Hobart, but in identifying this, is now the right time to sell?
Just adding this into the fray. Given the tight Federal budget and reported job losses in Canberra is the medoium term for Canberra going to be stunted because of the relatively tight fiscal outlook? If there is a change of government will this add to the pressure?
Depends how they all fit within your overall strategy, and whether the property is still fulfilling the need you originally bought it for.
However, if the property is negative geared AND low prospect of growth, you are not investing for either capital growth or income.
The other way to look at it, is if the purpose was PPOR and it no longer serves your function, do you really want the same place as an IP.
I agree with most above, i.e. sell the Hobart property but I'm not keen on the potential loss from a traditional sale in a soft market.
If it were me, I'd consider selling the Hobart property with vendor finance. In our experience, using this selling technique would get you a premium price, i.e. it would lock-in your capital gain, and give you positive monthly cash flow after all expenses are paid on the property. Happily the new vendor finance buyer would also be responsible for all maintenance on the property.
As always, the trade off is you lose you long term capital gain from the property but you're already considering a potential loss making traditional sale. The other limitation would be that the funds released from the Hobart property wouldn't be available for the development idea in Melbourne but my guess is, if the Hobart property was currently performing well, you wouldn't be considering selling it.
Even at a conservative $300 per month positive cash flow from a vendor finance sale, you have the potential to improve your position on this property by $13,600 per year in cash flow alone, i.e. your current $10K loss plus $3,600 positive cash flow. Your locked in capital gain will depend on your vendor finance sale price.
Why did you buy Hobart?
You knew it was NG then..what has changed?
Can you market it differently..to increase revenue?
If you were buying long term...this isn't long term.