Do We Sell...We Can't Decide! (Long Post)

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From: Fiona W


Hi,

We keep changing our minds about whether or not to sell (I know...not good to hesitate too long with property investment!). This is our scenario:

We purchased our first investment property, a small 2BR unit, 2 years ago in South Frankston, Victoria, for $70,000. We had it on the market a couple of months ago and received an offer of $98,000 in the first week. It is really run-down and needs carpets, painting, new kitchen. We estimate $3,000 to fix it up. This would make it worth about $105,000 at least. (After advice received).

By the time we evict the tenant to actually fix it up, it will either be around Christmas, or we can extend the eviction notice until mid-Jan (when we are on holidays). This may not be the best time to have a vacant property on the market?...not incoming rent etc.

I guess, we don't know whether we have made as much as we will from it, so we should sell it. Or do we do it up and just hold on to it, and refinance to prepare ourselves for the bargains ahead?!

We do have another unit in the same block, better condition, and at the front, which we want to keep. We also have our own home which we have just purchased and owe about $130,000 on. We thought we could pay off some of our loan with the sale of the unit.
Food for thought desperately needed! Thankyou, thankyou, thankyou!
 
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Reply: 1
From: Peter Davidson


SELL, SELL, SELL!

Sell now. The market is slowing down, so get in now to make a few bucks.

Inside information has revealed that consumer confidence is plunging and finally, people have come to realise that property is overpriced.

In 6 months time, you'll be lucky to get $80K for you property.

Then pay off your mortgage and in 12-18 months use the equity in your home to buy 2 investment properties when the market settles.
 
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Reply: 1.1
From: See Change


Peter

curious to know where your "inside " info has come from.

see change
 
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Reply: 1.1.1
From: Fiona W


Sea-Change, It's not really inside info...it's advice received from a RE Agent, but he is a friend of ours, and helped us get the property in the first place.
 
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Reply: 2
From: Duncan M


What rental returns are you getting on the Unit at the moment?

Duncan.
 
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Reply: 2.1
From: Fiona W


Duncan,

We are getting about 9-9.5% rental return. It's pretty good I think!
 
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Reply: 2.1.1
From: See Change


Fiona

my comment wasn't directed at you . It was aimed at Peter with his Sell , Sell , Sell . and his subsequent comment re inside info about consumer confidence.

I would be curious about the source of his "insider info".

I have just sold my house and am in two minds about whether to buy at moment or to rent and buy later on. I have posted my personal observations about the market place previously and am very interested in getting other peoples opinion , but I like to know on what evidence those opinions are based on.

The other alternative is that your original post is a "dorothy dixer"


happy investing see change
 
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Reply: 1.2
From: Kevin Forster


On 9/25/01 11:17:00 AM, Peter Davidson wrote:
>SELL, SELL, SELL!
>
NOT NOT NOT.

The property markets going to crash? Which property market is going to crash? The residential, industrial, commercial?

Then within the Melbourne residential market there is the inner city market - which is what most commentators talk about and the outer suburbs and then the regional centre markets. Frankston is one of those regional centre markets with properties ranging in price from $1 mil to $90k. I know the Frankston market as I invest in that area as well.

Some of the outer suburb markets are not full priced as yet and probably have some more opportunity for growth as part of the ripple effect of growth. They take off slower and slow down slower and tend not to have the boom and crash of the inner city suburbs.

Whether to sell or not to sell, it depends on why you bought the unit in the first place. If it's buy and hold then improve and refinance to access the increased equity to fund further purchases. If it was for capital growth then sell and probably you will find it will go for more than last time as there has been further price increases in Frankston in the last few months.

Kevin
 
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Reply: 2.1.1.1
From: Jim Kouta


SELL, SELL, SELL alright. I've just sold 4 of my 8 properties in the last 3 months and I've made squillions. As a Real Estate agent myself, I'd highly recommend selling now, even though Spring has hit, people are not as confident and interest is fairly "average" at the moment. I'm glad I sold when I did. I'm going to throw the 1Mil+ into the bank and buy back into the market in about 12-18 months time. I would say it would be pretty flat at this stage. How else do you think I drive around in a brand new BMW? Lot's of commission for overpriced houses, but shhhh, that didn't come from me. Just giving some insider info.....

Regards,

Jibmo.
 
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Reply: 2.1.1.1.1
From: Astro Boy


Hey Jim,

good to hear things are going well for you, I'm just curious however - what about CGT on the profit you have made?

Do you think the reduced prices in 12-18mths will be enough to cover your tax, transaction costs, stamp duty etc and still come out ahead?

Cheers
astro
 
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Reply: 2.1.1.1.1.1
From: Jim Kouta


Absolutely, I've made some serious cash! And with the collapse of Daimaru(and others) and many more to follow, you'll be surprised at how many bargains you'll find in the near future. Even Costello has warned us! Do you really think he'd be making these sorts of bleak outlook statements before an election? Can it become any clearer on how bad the economy is becoming and what impact that will have?

Just my 20 cents worth for a guy that's been around for a while :)
 
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Reply: 2.1.1.1.1.1.1
From: H T


tossa
 
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Reply: 3
From: David Nolan


Hi Fiona, thanks for the question. It certainly created a fair amount of rhetoric. The only way you can determine if you should sell or not is to do the calculations, in full and with due consideration to your long term investment objectives.
Simply suggesting you sell is too short sighted. There are numerous issues involved, the most obvious of which are taxation and the high costs associated with buying and selling.
If you believe that the market will come down, and you might like to capitalise on your gains now and, "pick up a bargain in the future," consider this. It may be possible for you to establish, or increase, a credit facility secured over the property you currently own.
By doing this you will have created access to equity without triggering a capital gains tax problem.
If, as has been suggested, the market turns down, the lender may not necessarily reduce your credit facility. With lower property prices you can use your equity to help fund a new acquisition.
All of this assumes that your long term objective is to build a portfolio and that the market actually falls.
If, on the other hand the market does not fall as much as would be needed to justify selling and waiting to buy again, you still have your current property.
Sorry, there is no easy answer. The true answer lies in your own needs and objectives and quality, independent advice, specific to YOUR situation.
David Nolan
Australian Property Concepts
 
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Reply: 3.1
From: Rolf Latham


Hi David

Good post.

Unlikely in most circumstances that a lender will reduce limits a la margin calls. Most finance agreements do contain clauses about default "should the lender deem that the security value of the property has been materially affected blh blah blah.

Having said that I do not know of anyone that this has ever been imposed upon.

One way to minimise this very unlikely risk is to stay away from Revolving Lines of credit with regular reviews.

Ta

Rolf
 
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