Decisions, decisions -what do people think?

[Tiggy]

Million (and possibly more) dollar question - what will appreciate more in 5 years; a block of water front land at a beautiful little coastal village on the Fraser Coast (SEQld) OR an older style rental house in St Lucia, Brisbane? We own our home, have IO loan on an IP (going along well).2 years ago we also bought that waterfront block (definite lifestyle buy and my dream block). Long term plan was to sell up and build a home on the block to retire to (a few years away). Problem - interest on the land is all dead money and we are paying a lot of it (still owe 60%). Did some number crunching and was amazed how much better financially we would be if we sold the land and bought a IP in Brisbane that uni son could live in with many friends, thereby providing good rental return (currently also paying out rent for him). Could probably afford to eat more than gravel, which is tasty, but plays havoc on the teeth.

Should we bite the bullet while we still have teeth and sell my dream block of land (boo hoo)? Due to depressed market, we would have to sell it for what we paid plus a little extra to cover stamp duty/solicitors/agent fees. Then with the $ from the land + a loan, snap up an IP? 5 years from now, sell IP (that has hopefully made some capital growth) after enjoying a good rental plus negative gearing benefits. Will I then be able to afford to buy back my dream block? Decisions, decisions? Love some feedback, but please be gentle. I am new to the forum.

 

[Tiggy]

Sorry

Sorry, just realised this probably should have gone in Property Investing _ Other section. Told you I was new to this.

 

[kathryn d]

Since this is your dream lot of land, and it doesn't make money etc etc..I still suggest you keep it.
Concerning your son, there are a couple of ways to do it.
Buy an IP and have him take in roommates. If he takes in 4 roomates have the bills split 4 ways..not 5. He is not sharing, he is taking in boarders.Have all bills included in the board. he will rent free. The others do not need to know the rent or any further details. They just need to know what their share will be.
Or,have your son rent a large house, and take in boarders..same as owning the IP scenario.

You are taking all the responsibility for loss board..a vacancy..bond..etc.

 

[Tiggy]

Thanks Kathryn
Thanks for the suggestions re IP and son. What I didn't mention is we can't afford to buy the IP without selling the land - it's one or the other. Do we go with the lifestyle choice (costing LOTS in interest) or the IP?

 

[Tiggy]

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Do I give up this view in the short term, so I can make enough money in the long term to be able to actually afford to live there?

 

[kathryn d]

Only you can make that decision.
But I wish you good luck.

 

[marg4000]

If you decide to buy the IP, my only concern is that 5 years is not a long time regarding holding real estate. You have already seen that the 2 years you have held the land will not give you a return on your investment, assuming you can actually get the price you think.

On the other hand, a rental property will definitely cost you less. So long as you charge your son close to market rental, with the income from the other occupants and negative gearing possibilities it will cost you far less to hold. So long as you buy a flood free property it should show gains as that areas with easy access to UQ are always sought over. As your son and his mates will be living there (guaranteed tenants, no vacancies), you also have the opportunity to buy a more run-down property and do improvements over the 5 years you expect to hold it to maximise your chance of selling at a profit.

We do know of people who have bought units near UQ while their kids were at uni, and the sold after the last kid left. From memory they have all done quite well out of it.

So long as you can sell your land at a reasonable price, financially you would probably be better of in the long run to buy the IP in Brisbane. This is dependent on your being confident landlords and being prepared to evict non-paying "mates" if necessary. Make sure all boarders have correct leases in place and insist on direct debit rental payments.

My personal opinion only.
Marg

 

[mary&mat]

Is it an option to allow campers to stay on your block of land? May help with offsetting some of the interest costs?

 

[Tiggy]

Unfortunately no. Considering it is a quiet little coastal village with a permanent population of about 20, the Fraser Council has set very strict rules. We had looked at this possibility, but with a shed. Not a goer I'm afraid. Tinnanbar has quite a few original fishing cottages, but as it has grown in popularity as a holiday spot (with corresponding increase in land values) new houses are decidedly upmarket. I guess I can understand why they wouldn't want people camping in sheds, or on blocks of land.

Thanks for your input though, much appreciated.

 

[mary&mat]

This is a bit off the beaten track in terms of ideas & I really don't kow the technicalities that may surround doing this, but...

could you plant some fruit trees on there & claim it as a small business that way?

 

[Tiggy]

Alas, it is only a residential sized block (1000m2) and council has stipulated it must be used for housing. Looks like my decision has been made for me anyway, as we found out last night our uni son and friends are to be evicted early March (bank is repossessing it). Worst possible time as every other uni student is looking, plus there will be extras due to floods. A nightmare to get a house in the area they want. This means we have to sell the land urgently, so we can buy a place for them to live in.

As Marg400 wrote, financially it makes sense to sell non income producing land and buy an IP, it was just that this block has been a dream for me for so long...still I guess you can't live on dreams. So in about 7 weeks we have to sell a block of land in a place no one has heard of and purchase an IP. Doesn't sound very likely, does it? We have actually had the block on the internet for a couple of months to gauge interest (not much), but have just reduced the price. Any tips (other than winning Lotto)?

 

[Ms Jade]

I feel for you, I really do. But you are comparing 2 different things. Of course you'd be better off financially with an IP but that block of land was not a financial decision. IMO it's a big ask to sell a waterfront dream for retirement in order to buy a house for your son & his friends. I know my parents wouldn't have thought of doing it & I certainly wouldn't have expected them to.

Is it really so tight that there are no rentals available for them?? And I don't know if there are special circumstances, but can your son not get a job & pay his own rent? I remember share houses being about $100 per room about 20 years ago & it looks like they're maybe $150-200(?) now. I'm just worried that despite your best plans it may not be so easy to buy back your dream block in 5 years.

 

[Tiggy]

Yes I realise there is a risk that in 5 years when I want to buy back into Tinnanbar the prices may be too high. The block was more my dream, rather than my husbands, which makes the interest we pay every month a sore point, especially as it is all dead money.

My son doesn't actually expect us to do this, but we feel it is the best thing to do in view of the circumstances. You are just about spot on with the current costs around Taringa/St Lucia. Main problem is there are 4 of them, so need 4 bedrooms and ideally 2 bathrooms. The house they are in now is perfect...apart from the fact that the bank wants it back I've even contacted the solicitors representing the bank, but there is no chance they can stay. Bank wants vacant possession so it can be auctioned.

 

[Tiggy]

Just finished talking to a dispirited son. Nothing to rent, so I am biting the bullet and having a go at selling the land, and buying a house (definitely in that order). Thought I might put the land details on the caveat emptor section, so if you're interested check it out there. Thanks so much for all your input and advice. If my Lotto numbers comes up tonight I can keep my land AND buy a house!!!!

 

[kathryn d]

Just finished talking to a dispirited son. Nothing to rent, so I am biting the bullet and having a go at selling the land, and buying a house (definitely in that order). Thought I might put the land details on the caveat emptor section, so if you're interested check it out there. Thanks so much for all your input and advice. If my Lotto numbers comes up tonight I can keep my land AND buy a house!!!!

Why is up to you to find the place for your son and his friends to rent?
Why don't some of the friend's families buy/rent a place and your son rent from them?
Just a thought..then you wouldn't need to sell your land

 

[mary&mat]

Hi Tiggy, kinda agree with Kathryn.

How old is your son? I was paying my way at 15. I, like many others, have worked part time jobs (probably about 30hrs a wk) to pay our way. (And probably received Austudy/the equivalent). Whether we lived at home or not, we worked & studied full time.

I really do understand a mother's love. But is he taking the mickey a bit? He could move home with you (possibly?), save up some bond money & 2 wks rent & get a place all by himself.

Don't mean to sound harsh, you sound really lovely....don't be a sucker.

disclaimer: I take back all my comments about him if he is currently working.

 

[wylie]

I also cannot understand why you must give up your dream block to buy a place for your son and his friends? Different thing if this idea is part of your plan, but uni students manage somehow, every year, to find somewhere to rent or share.

The costs of selling your dream block and buying an IP would pay his accommodation for a long time. How old is he, does he have a part time job and how long has he left at uni?

 

[Tiggy]

Thanks for your words of support and advice. Perhaps I have given the wrong impression of my son (lucky he isn't a member of the forum!!!!). He hasn't asked us to buy anything, in fact he wants to try and get a place to rent by himself. He does work part time and as we live in Gympie, moving home isn't an option. It is simply that we have crunched the figures and it makes sense financially. Interest we are paying on the land is dead money. It is also very difficult to get a place to rent in Brisbane at the moment, particularly close to Qld Uni. I know this is always the case, which is one reason for buying an investment house there. Once he has finished uni, we can continue to rent it out for a few more years. If we can't sell the land it is all academic anyway. It was just a 'seize the moment' opportunity. If he gets a rental house, we'll stay with the land.

 

[weg]

I think if your son makes the decision to move into an exising sharehouse he'll have few problems finding accomodation.

Is there a reason why living with his friends is necessary, that you need to organise for everyone to live together? What are the other parents doing in this regard?

As others have said in the other thread, your block may take a while to sell, especially as it's more a lifestyle, retirement property and a vacant block of land where other similar blocks are selling.

 

[wylie]

Don't think we are judging you or your son. Just trying to see why you would sell a block that you obviously love to help him, when he can find something himself. I imagine it comes down to you subsidizing his rent or part of it against getting some growth and income from a place you buy. I know a 22 year old whose family in the country pay his rent (shared 2bed unit), living costs, vehicle and fuel to the tune of $50K per year . This is according to my son who might have fudged the figure in order to make us look like tighter$es

He is a nice chap, doesn't appear spoiled but to study, pay rent and living expenses would mean long hours working to the detriment of his studies. He is very lucky his parents can afford it and are prepared to be so generous. Many uni students are not so fortunate and have no choice but to do it the best way they can.

Don't worry, I'm glad my son doesn't read some of the whinges I have had here about him