Desperate situation..please help

Discussion in 'Property Finance' started by Andrew2708, 10th Feb, 2015.

  1. Andrew2708

    Andrew2708 Member

    Joined:
    10th Feb, 2015
    Messages:
    8
    Location:
    Baulkham Hills, NSW
    Some help please...

    A background, foolishly I bought in Blackwater and Mackay when rents were crazy and out look was bright. Now rents in Blackwater have gone from $950pw, purchase price $495k to now $350pw and an agent told me today if I sold now I would expect $200k as there is zero interest in a property like mine. Mackay is a similar story, rent $700pw, PP $485k to $300pw and a $380k expected sale price. I am currently on a fixed rate for the next few years of 4.89%.

    Will this get worse???

    I have a house in Sydney that has about $500k equity. My mum lives with my family who has contributed into this purchase so selling this property is not an option.

    I am looking for some exit strategies or advice on what to do , where to go or a plan moving forward. I am thinking of going to the bank and asking for help. Is this a good idea? Can they foreclose on me if they learn of this situation?


    Any ideas or suggested life lines would be hugely appreciated.

    Thanks

    Andrew
     
  2. MRO

    MRO Member

    Joined:
    24th Apr, 2013
    Messages:
    488
    Location:
    Perth Hills
    What is the loan value on each of the properties?

    I dont understand the Sydney property. Is this your PPOR or is this a house you bought jointly with relatives for your mother to live in.
     
  3. pinkboy

    pinkboy SS Lookerafterer

    Joined:
    31st Jul, 2011
    Messages:
    2,555
    Location:
    Mackay, Queensland
    Surely you put all the megabuck$ away for a rainy day when you were receiving them knowing you bought in boom/bust towns?

    Blackwater I cant help you with. Your agent is right, it has very little prospect of increasing in value for a long while yet. BMA and Currugh mines there aren't expanding anytime soon.

    Mackay is a little more diverse. What/where did you buy for $495k that now only rents for $300? Who is your PM?


    pinkboy
     
  4. Andrew2708

    Andrew2708 Member

    Joined:
    10th Feb, 2015
    Messages:
    8
    Location:
    Baulkham Hills, NSW
    The house in Sydney is my PPOR.

    The blackwater property has $475k against it and Mackay has $450k against it.
     
  5. benofbrisbane

    benofbrisbane Member

    Joined:
    11th Nov, 2011
    Messages:
    71
    Location:
    Brisbane
    the banks won't foreclose as they won't know unless there is reason for them to find out like a refinance or something.

    I think the only thing to do is ride it out and hope it gets better, which you would think it will it is just a matter of time.

    it is only a loss once it crystallises. If you don't sell there is no loss.

    good luck and whatever you do make sure that you do not rush into anything and think about all your options very carefully.
     
  6. Andrew2708

    Andrew2708 Member

    Joined:
    10th Feb, 2015
    Messages:
    8
    Location:
    Baulkham Hills, NSW
    The Mackay house is located in Eimeo, it was bought as a house land package so it is a newish 4 bed 2 bath 2LUG and aircond house.
     
  7. Perp

    Perp Member

    Joined:
    31st Oct, 2007
    Messages:
    6,747
    Media:
    5
    Location:
    Brisbane, QLD
    Can you afford to keep carrying them at existing rents?
     
  8. pinkboy

    pinkboy SS Lookerafterer

    Joined:
    31st Jul, 2011
    Messages:
    2,555
    Location:
    Mackay, Queensland
    Agent?

    pinkboy
     
  9. Andrew2708

    Andrew2708 Member

    Joined:
    10th Feb, 2015
    Messages:
    8
    Location:
    Baulkham Hills, NSW
    Hi Pinkboy,

    The agent is 360 property management.
     
  10. Andrew2708

    Andrew2708 Member

    Joined:
    10th Feb, 2015
    Messages:
    8
    Location:
    Baulkham Hills, NSW
    Hi Perp,

    yes that is the issue, with rents declining my fear is that once my loans come of Interest Only and if the rates climb then I am in a real bad situation.
     
  11. MRO

    MRO Member

    Joined:
    24th Apr, 2013
    Messages:
    488
    Location:
    Perth Hills
    If you can find $70k, why not sell Mackay and pay off debt on this property, rent out a room or two in your Sydney PPOR to help cover the costs on the other property.

    You are in a difficult situation so you may need to look at alternatives which you may not have wanted to consider previously.
     
  12. pinkboy

    pinkboy SS Lookerafterer

    Joined:
    31st Jul, 2011
    Messages:
    2,555
    Location:
    Mackay, Queensland
    Fees aside, 360 are relatively new to the game up here. A reasonably new 4/2/2 in Eimeo should still get around the $400 mark.

    I guess whats killing you up here is the Rates (Im guessing around $3,300ish), Insurance (Ill stab at $1,800), PM fees ($1372.8 (8.8% guess)). Assuming no vacancy and no maintenance, 42% is being eroded by hard costs and we havent een got to interest yet.

    I guess you're also in no position either to take the risk of vacating the current tenant and looking for a higher paying tenant, because there are so many available rentals up here you could be waiting a while.

    Are these properties bought in names or other entities? Selling the Mackay one and taking a loss of $50k assuming you sell for $400k ish will leave you with short funds but relief.

    Blackwater Im afraid will be a harsher lesson.


    pinkboy
     
  13. jpcashflow

    jpcashflow Member

    Joined:
    23rd Jun, 2014
    Messages:
    307
    Location:
    Melbourne
    Hi

    Hi,
    With the mining situation things out their will only get worse.
    Some times in life we need to take the good with the bad... and this is business.

    I always encourage to put money away or not to take high LVR loans for this reason.

    Maybe sell the one with the biggest risk and loan attached to it... talk to your accountant and see if a capital loss will assist if there was a capital gain at a later stage.
     
  14. Andrew2708

    Andrew2708 Member

    Joined:
    10th Feb, 2015
    Messages:
    8
    Location:
    Baulkham Hills, NSW
    Hi Pinkboy,

    All the properties are in my name. The Mackay property is bleeding the worse because of all the fees you correctly point out. If I sell this property I will take a $70k loss. What do you suggest?

    Do you have any news on when coal mining will come back a little?

    If I were to sell, do you know any good agents?
     
  15. Andrew2708

    Andrew2708 Member

    Joined:
    10th Feb, 2015
    Messages:
    8
    Location:
    Baulkham Hills, NSW
    Hi JP Cashflow,

    The property which is the highest risk carries the biggest loss which is Blackwater. I could lose $300 odd K if i do this.

    Do you think an account can provide an answer to this situation?
     
  16. pinkboy

    pinkboy SS Lookerafterer

    Joined:
    31st Jul, 2011
    Messages:
    2,555
    Location:
    Mackay, Queensland
    Are you bleeding or hemorrhaging?

    If you're just bleeding, you might want to consider trying to increase your income at work or a second job?

    If you are hemorrhaging, you may have to consider some more drastic action, and make some hard decisions. Do you have someone you can turn to that can run you through some scenarios regarding tax and accounting?

    The boom is over for now. Your best bet is to get someone committed longterm at a reasonable rental price.

    I have never sold a property in Mackay (and I hold more than a few here!), however I can suggest you a few who I would sell with. PM if you want to go down this route.

    pinkboy
     
  17. sanj

    sanj Member

    Joined:
    16th Jul, 2010
    Messages:
    3,441
    Location:
    perth
    an accountant wont be able to help you make commercial decisions but they can advice on the tax aspect.

    it's a really painful situation to be dealing with, youre talking about around 400k worth of capital losses.

    if there really is very little prospect of growth in either property id personally be inclined to swallow the bitter pill and get rid of it, even if it meant needing to sell your PPOR or refinance it to pay off the bank. main reason is that youre having to prop up the losses every year anyway, if you dont see the property value growing it is entirely pointless to pump more money in every year.

    best wishes
     
  18. Kinnon Bell

    Kinnon Bell Member

    Joined:
    22nd Jun, 2010
    Messages:
    1,166
    Location:
    Cairns & Melbourne
    Keep in mind also being on a fixed rate that you will more than likely face break costs if you sell before your fix term ends.
     
  19. Xenia IM

    Xenia IM Property Manager

    Joined:
    19th Dec, 2014
    Messages:
    754
    Location:
    Adelaide, South Australia
    Andrew - I would definitely make a time with an accountant and discuss all options.

    What is worse case scenario?
    what would your financial position be like if you were to sell everything now and take a loss?

    I would shift focus to what CAN be done now rather than relying on market changes and what ifs.

    I do not know anyone who is successful who has NOT lost money, this is all part of it, and most of us have been through something similar - it's stressful at the time but you learn to grow from it and move on.

    There will always be someone who will point out exactly what you did wrong and how you could have done it better. None of that is helpful and if they themselves have not lost any money ever, that is probably because they have never taken the risk to do anything. Overcoming people's perceptions of you once you've lost a heap of money is sometimes more difficult than the loss of money.

    Do what you need to do - get proactive with an action plan based on your total financial situation and don't worry about it. You are NOT money so do not ever let anyone pin that to your self worth - tell them to shove it.
     
  20. MRO

    MRO Member

    Joined:
    24th Apr, 2013
    Messages:
    488
    Location:
    Perth Hills
    It sounds like the tax situation is relatively simple. He will make a capital loss on any sale and this would be applied against future capital gains. I dont think seeing an accountant will help a lot.

    Have you got $70k spare to payout the loan if you sell the Mackay property?

    Can you afford to cover the payments at the moment or are you just worried about this happening in the future?