Advice Needed

[tvadera]

Hi All,

I have learnt a lot from SS forums. It has given me motivation and will to build a portfolio:

Current status: Brought a PPOR in 2008 for 285K (first home buyer, no stamp duty, gov grant covered it), currently valued by bank at 340K

Got 1 more IP 3 months back (after lot of research, inspections, etc) for 335K and stamp duty of approx 13K so in all 350 in total. Currently rented for 300 p/w and main objective was to get Capital growth and service the shortfall.

However my strategy has back fired due to markets not moving, and in 3 months i can see discounting of 3-4% happening in that price bracket (note its a entry level price bracket, still correction is taking place).

I have borrwoed 100% of finance to maximise negative gearing hence I am out of pocket each month by approx 980$ and IP deposit funds have been sitting in offset acct.

This has led me to think:

-Whether I shld sell my PPOR and move to IP and covert it as PPOR
-Rent my PPOR because it would be CF neutral/or may be shortfall of 200 pm

This was my first exp with IP investment and I really dont want to throw it away because its taken a long to get into the mindset of an investor.

Lot of friends/family members are advicing me to sell it because its not going up in value , that was main purpose of purchase.

Any ideas/opinions /feedback of how I can imporve my current situation would be appreciated. I want to focus more on how I can handle it rather than dispose it.

Regards,

 

[Shaneelastic]

dont expect gains in 3 months!!!!

 

[The Y-man]

I have borrwoed 100% of finance to maximise negative gearing hence I am out of pocket each month by approx 980$ and IP deposit funds have been sitting in offset acct.

How comfortably can you maintain the $980 shortfall?

The Y-man

 

[marg4000]

You are far better off living in the property with the lowest debt, in your case your PPOR.

Property should only be bought with a 7-10 year time frame to give it a chance for capital growth. There are no guarantees that even that time will produce a gain.

Should you decide to sell a property, consider
Which property would you prefer to live in? Quality of life is important too.
Which property has the best prospects for future capital gain?

Can you afford to continue the $980 per month loss? Can this be offset by the appropriate paperwork to reduce your tax payable instead of waiting for a refund?
Marg

 

[Propertunity]

However my strategy has back fired due to markets not moving, and in 3 months i can see discounting of 3-4% happening in that price bracket (note its a entry level price bracket, still correction is taking place).Regards,

What kind of strategy did you have?? You seem to be panicking at the 3 month stage of a (what should be) a 7 - 10 year plan for an asset like RE.

Bear in mind that it is not uncommon for property to go flat / slighty fall / slightly rise for many years. Most of the growth happens in just a couple of the years. Sydney for example went flat / negative for the 5 years from 2003 - 2008.

How long can you hang on for? What rent increases could you get? Is there a way to perhaps get extra rent by renovating the property? Claim your neg gearing / tax back on a weekly basis as Marg said.

 

[mech81]

As everyone above has said. Property is a long term plan. I'm a new investor like you. Bought a unit in Melbourne and am now slowly paying it off. Don't own a PPOR myself as I move around Career wise quite abit. It can dampen your spirits with the current market the way its going but if you bought right and havent overstretched yourself..just hang in there. Good properties will reward you if you are patient. Try not to sell if you have to as you havent realised your gain yet.

Is there anything you can do to the IP to improve its yield? easy things...quick lick of paint, putting in a new front door, a quick kitchen redo..things like that.

Also between PPOR and IP, sometimes it may be easier to turn your PPOR into an IP and just rent. I'm not sure of your personal circumstances and your income but that can be an option. Or weigh up between your PPOR and IP and decide on the NUMBERS which one is better as a PPOR and weighing it up with lifestyle choices and so on.

Hope that helps

 

[jingo]

Hi All,
Current status: Brought a PPOR in 2008 for 285K (first home buyer, no stamp duty, gov grant covered it), currently valued by bank at 340K

Hi tvadera,

You've had a good gain in your PPOR in a short period of time. That should be encouraging.

Got 1 more IP 3 months back (after lot of research, inspections, etc) for 335K and stamp duty of approx 13K so in all 350 in total. Currently rented for 300 p/w and main objective was to get Capital growth and service the shortfall.

Sounds good. Especially as you have put a lot of time into researching your purchase. No doubt you have bought well.

However my strategy has back fired due to markets not moving, and in 3 months i can see discounting of 3-4% happening in that price bracket (note its a entry level price bracket, still correction is taking place).

I don't think your strategy has backfired. (Unless you can't meet repayments). Property investing is not all about capital growth. It is a combination of factors - including managing cashflow/rental return and capital growth over time that make the strategy work. Property investing is not a get rich quick scheme, and never was! As others have mentioned, there will be periods of negative growth, stagnation and at other times rapid capital growth. I think Player mentioned that markets move 1/3 of the time and for the other 2/3's of the time they stagnate or go backwards.

I have borrwoed 100% of finance to maximise negative gearing hence I am out of pocket each month by approx 980$ and IP deposit funds have been sitting in offset acct.

Ok - perhaps you could fine tune your strategy and start putting more money into your offset accounts (start with the PPOR offset first) to bring down payments.

This was my first exp with IP investment and I really dont want to throw it away because its taken a long to get into the mindset of an investor.

Lot of friends/family members are advicing me to sell it because its not going up in value , that was main purpose of purchase.

Get yourself a copy of Jan Somer's book - Story by Story. In this book there are stories of investors being discouraged by friends and family members. They ended up not buying IP's or selling them and missing out on the gains in the long run.

Always be careful who you take advise from. Are these people wealthy? If so, give their advice appropriate weight and listen to them. If not - well.....

Regards Jason.