Have i stuffed up big time?

Hey all,

Been reading your forums for a few months now and seems like there are a lot of very knowledgable people. So i think its time to ask for some help!

I have one investment property at Gracemere (just near Rockhampton) currently getting $285 per week rent.. I purchased it for 180K. I owe $145K and it is expected to sell for around 300K (it is currently on the market)

I have 30K in savings.

I purchased a Residex report on the suburb which predicted only 2-4% growth over the next 5 years (this is why i decided to put it for sale)


So my big question is have i made a mistake selling it? Should i have just held onto it and purchased another IP?

If i have stuffed up do i have rights to take it off the market and if yes is there any penalty?

So i guess my options are that if it sells i can look at purchasing another IP or 2 (or do i try and hold it and purchase another IP)

Please help as all the options are doing my head in.

Just for the record i am 27 and my income is 55K.

Any help would be much appreciated :)
 
I suppose it comes down to what are your goals with
regards to your properties.

Buy and hold, buy and reno etc.
once you work that out you may be in a better position to
make a decision.
What criteria led you to choose that location in the first place?



Cannot talk about pulling if off of the market once it is on.
 
I purchased a Residex report on the suburb which predicted only 2-4% growth over the next 5 years (this is why i decided to put it for sale)
:confused: First of all who says Residex's predictions will turn out correct? Second CG goes up in large jumps (usually). When you sell you lock yourself out of future CG forever. Third, selling costs and repurchasing costs eat up large chunks of capital. Fourth......yes you've stuffed up. Fifth, never ever sell unless it is a dog. It has not been a dog so far. Sixth......oh dear.


So my big question is have i made a mistake selling it? Should i have just held onto it and purchased another IP?
Yes, you should have refinanced some cash out to buy another IP

If i have stuffed up do i have rights to take it off the market and if yes is there any penalty?
Withdraw it from sale at no cost to you except perhaps advertising - read your selling agency agreement.
 
Stuffed up? Hardly. You don't go broke making profits.

It's beautifully positively geared. That's pretty cool. So, the main reason to consider selling is if you think that you can generate a better return elsewhere. In which case, too, you should also look at whether refinancing will allow you to have the best of both worlds. Is that a viable option for you? Rolf, anyone?

CGT is hardly worth worrying about. All else being equal, after selling costs etc, it'd only be about $15k. Give or take a little, and probably not due til March 2011. You'd also pocket a good $140k or so with which to reinvest (or play :D ).

I wouldn't ever do anything just because Residex said so. But, it may be worth weighing up the options and potential paths forward.



And in answer to the other question; that depends on what you've negotiated with the agent. You may have to pay some advertising, your solicitor may want to issue an invoice, but I wouldn't expect too much else.
 
Last edited:
You have certainly done well with this one. You know, you can probably draw down your equity from this property and buy another 1,2, maybe even 3, Depending on price and serviceability. Talk to a good Broker. If it was me, I wouldn't sell unless the property had proven to be nuisance and I would certainly NOT sell just because Residex said I wasn't doing well. Who knows, you could buy somewhere that they recommend and do poorly.

As far as penalties for pulling out of the contract, well, Agents in different areas have different clauses. The ones I have used in the past don't charge anything.
 
There's lots of variables here, but, on the balance of probabilities, it seems like a stuff up, but not too late to correct I think.

If you're asking these sorts of questions, I don't think you'd be able to generate a better return elsewhere.

Lock your equity in by getting a re-valuation and loan top-up.

Sell if there's lot of maintenance or tenant issues/vacancy risk that you're fed up with or eat into that +ve cashflow.

What are the pros/cons of the property?

Surely your selling decision is not soley based on Residex predictions?

Is that what you based your initial purchase on?
 
Last edited:
Well the pros are that it is never vacant and the rent basically covers the loan (with current interest rates)

Cons, well not sure except i'm not sure of the potential for much more capital growth and it is now about 9 years old so i am wondering if everything is going to start breaking/wearing out etc

I guess my initial reason for deciding to sell was that i thought i could use my profits to buy 1 or 2 more properties elsewhere (which might have better growth potential)

And i know Residex reports are not always correct but i'm still learning about property investment and i thought they would at least provide me with a guide as to where to start looking for another IP. I got the idea to purchase at Gracemere from the Residex Top 100 report so they have been okay for me so far (if anyone could give me some more tips for how to find good areas to invest i would really appreciate it!)

My overall goal is i would like to make enough profit from property investment to afford a house near the beach in Sydney.

Seems like the overall consensus is i shouldn't sell??

Anyway keep the advice coming i appreciate it and i obviously still have a lot to learn!
 
and it is now about 9 years old so i am wondering if everything is going to start breaking/wearing out etc

9 y/o... my first IP is turning 120 y/o in December (it's leaning a bit to the left though)! :eek:

The rest of your reply suggests that you got very lucky with this IP.

Without a clear plan of what you're going to do with the sale proceeds, eg. (if it's invested in another property) where to buy, what type of property to buy, what position within the suburb, when to buy, and the pros/cons of a property purchase...... it doesn't make much sense to sell IMO.

Also, don't put too much weight on the opinions you read on this forum (including mine). Do your own research. Everyone has their own biases. If you've been reading the forum long enough you'll understand these, and be able to put posts in some perspective.
 
hi jit
Everyone has their own biases.
I don't:D
couple of things the question is not did you stuff up
its why did you want to sell
was it the best price
did you have something better to invest in.
was the sale a good deal.
always there risk against profit
so it might still be a good deal to sell if the area is going to do 5% increase and you think its better to put the money into caveat lending giving 60% per annum you night say sell but the the risk on caveat lending is alot higher then leaving the property where it is.
you ned to look at whats the risk if I pull out against the gain I might make.
with reisdex that information but not something I would buy or sell on.
I buy on what or how to make profit.
and sell where the assett is producing less profit against another assett that will give me a higher return
or into someting that has a projected higher profit.
I can tell you one thing
you will not be the first nor will you be the last that thinks have I stuffed up
but the answer is very simple for me
at 27 make a choice
decide on a path done the plan
and look back and correct as you go.
any mistakes file the cost up as learning.
and simple don't worry about it.
owe and with regards to that house near the beach.
you can get that very quickly
as long as you focus on it
plan to get it
and simply stick to the plan.
the problem for most is they move away from there plan or the let things like worrying have then done the right thing here or there and lose focus on the plan
so whats the plan
I have no idea your plan
I know mine
you need to work out your plan and when you have
question like this will simple melt away because you will know where you want to get to
and if this property is hindering you getting there then sell it
if its assisting then keep it.
as for have you stuffed up big time
the biggest stuff up I see is alot of people don't have any form of plan.
and have simple no idea of what they are doing they just buy to buy or hold to hold without any direction or plan.
this is the best I can do
the truth for me is you cant stuff up on real estate if you hold it long enough.
but the idea is to leverage and that a bit harder.
and leveraging or how to invest via it does need planning.
I am also not one for decideing to cross a road getting half way turning around and going back
why because you never cross the road.
if you decide on some thing just do it.
we are talking here about real estate and there is no such thing as the best deal the best property the best growth or even the best return.
we are talking some bricks in a pile on a bit of dirt with a bit of paint on it.
so as you can see I don't fall in love with property its a vehicle to an end.
hope this helps
 
A positive cashflow property that is only 9 years old. And you want to sell because of possible future maintenace issues.:confused: I hold many 35-45yo properties and, sure, I have maintenance, but nothing that big that I would want to sell them.

It has been my experience that water heaters (except where they get stolen) and ovens last for more than 9 years. So do kitchens and bathrooms. Paint, well, that depends on the tenants. I've got my first IP that we have only painted once and is still looking good 11 years later and another that has had several touch-ups.
 
Hey all,

Been reading your forums for a few months now and seems like there are a lot of very knowledgable people. So i think its time to ask for some help!

I have one investment property at Gracemere (just near Rockhampton) currently getting $285 per week rent.. I purchased it for 180K. I owe $145K and it is expected to sell for around 300K (it is currently on the market)

I have 30K in savings.

I purchased a Residex report on the suburb which predicted only 2-4% growth over the next 5 years (this is why i decided to put it for sale)


So my big question is have i made a mistake selling it? Should i have just held onto it and purchased another IP?

If i have stuffed up do i have rights to take it off the market and if yes is there any penalty?

So i guess my options are that if it sells i can look at purchasing another IP or 2 (or do i try and hold it and purchase another IP)

Please help as all the options are doing my head in.

Just for the record i am 27 and my income is 55K.

Any help would be much appreciated :)

(Picture me cuffing you behind the ear for being silly :D).

You paid $180k, and now it's worth $300k???

That's bloody not bad. Most 27 year olds don't own anything these days.

I wouldn't be selling anything based on a prediction alone.

I would be trying to use some of that lovely equity you've built up already to buy another one in maybe another area that has better prospects for bigger growth (do your own DD and not just rely on residex).

That way, you'll still get some growth from Gracemere (Residex did say up to 4%, right?) and some growth from another one.

Compound interest is the greatest invention known to man as Einstein used to say. Imagine if you have about 5 of these babies going up at a paultry 5% per year....

If you are having no problems with holding this IP, why sell? - unless you know you can do better with a different investment vehicle.

By the time you sell, pay out all your costs and CGT, you would need to do remarkably well in a very short time in another venture to recoup that finance drain.

Here's a story to help;

One of my mechanics (who is now 48 and still renting) was talking yesterday about when he was an apprentice and his Dad told him to buy a block of land near his home in Yarrawonga - they were very cheap at that time.

He didn't buy it (eventhough he could afford to) - bought a better car, and is still kicking himself today.

Here's another one; when I was in year 10 economics, my teacher said "Buy land; they aren't making any more of it".
 
Daniel, its not a suff up! we call it a lesson, and yes! there will be more lessons for you to come, thats why the best player here on SS are the older ones.:D

can't learn without lessons.....
 
Nah, you haven't stuffed up. But I'm with the "take it off the market, refinance, and buy another" crowd. Congratulations on making such a great start - you're way ahead of where I was at that age.
 
Thanks guy

From what a lot of you are saying i obviously need clear goals.

I guess mine, like lots of others, is to have a comfortabele life so obviously this involves making decisions and hopefully profits from these.

I'm never gonna be well off from my occupation so i need to make some wise investements.

In my own head i put the IP up for sale because i figured it has experienced such good growth over the last four years and indications are that it has slowed/stopped and possibly won't increase much more.

So i thought i would be better off getting the money i made from the property and investing it in something that is likely to grow at say 10% PA.
If i buy two IP's with the money i make and they experience capital growth i thought i would make more money from them than holding on to my property at Gracemere.

I am aware of capital gains and all the cost associated with buying and selling but i figured sooner or later regardless i will be paying capital gains (which i guess is a good thing because at least there is profit!).

So my conclusion was that over the next 5 years i would possibly make more money from purchasing 2 new IP's than say holding onto Gracemere and buying one more IP?

Maybe i'm way off the mark???

Thanks for taking the time to reply as well!
 
hi daniel
can I say that this is your second or third post and I think that you would do well to understand your goals and then go thru the search section and have a read.
I am as most here know part of an organisation that aims at goals and one thing that is part of that is to read 15mins a day.
if you do this that goal setting will become alot easier.
life is not a trial run
you cant turn back and say ops I would like to change that or take back time so you have to aim forward at all times.
and to do that you have to learn
there is no such thing as good or bad investing
there is moving forward taking stock and moving forward again and part of that movement is learning
if you stop learning or don't invest that 15 mins aday you are in fact spinning wheels the world is moving on and you are sat still that not a good place to be need to be going with the wave not waiting for it.
and thats only done thru learning.
just an idea
 
From what a lot of you are saying i obviously need clear goals.

Correct.

I'm never gonna be well off from my occupation so i need to make some wise investements.

I know your pain brother. Damn doing something I love.

In my own head i put the IP up for sale because i figured it has experienced such good growth over the last four years and indications are that it has slowed/stopped and possibly won't increase much more.

Every cycle cools - all part of the process. That doesn't mean it won't come back on strong again at some point...which will the be followed by a cool off. The question comes back to whether what will be gained from riding out another cycle is more or less than what you could do with that money elsewhere over the same period after all costs are considered.

I am aware of capital gains and all the cost associated with buying and selling but i figured sooner or later regardless i will be paying capital gains (which i guess is a good thing because at least there is profit!).

You're correct - being taxed is a good thing, because it means you're making money. Of course, however, you need to balance that view and not go out of your way to pay taxes :)

So my conclusion was that over the next 5 years i would possibly make more money from purchasing 2 new IP's than say holding onto Gracemere and buying one more IP?

I think the real question is, can you still purchase two new IPs AND hold on to Gracemere? If you're on a low income you'd need to be careful and try to buy IPs that are close to cash flow neutral or better...but is that such a bad thing? The only other consideration is it may mean you'd need to buy the IPs in a slightly lower price bracket than you otherwise might, but you can find suburbs with good growth potential in any price bracket.

Maybe i'm way off the mark???

As some have suggested, it might be fair to say you got a little bit lucky with your first purchase as your knowledge in some areas perhaps isn't what it could be. I think now's the time to do some more reading, learn how to research/evaluate a potential IP, create a plan, then execute.

You've made a tidy profit on your first investment and that's to be congratulated. You could sell now and it certainly wouldn't be the end of the world, however I think the great mistake would be to just sell off the cuff.

I think now's probably a good time for you to take stock of your situation, learn, consider whether you still think selling is the best idea and then move forward. Talk to a mortgage broker to learn how to unlock the equity in your current property for further investments.

Cheers
Greg
 
Like Undercoversports said, look into it. You may well find that you can still buy two new IP's while still holding onto the first one. This is one of the best things about IP's, they grow and it makes expanding your portfolio easy.

Another thing to consider is that maybe you won't see much CG in the next few years, but you may well see rent increases, which is good too. Rents go up in cycles, just like CG does. In my portfolio I have several where the rents stagnated for around 5 years while the CG surged. Now rents are catching up and some of them have gone up nearly $100pw EACH in only a few years. This helps to service more loans.:D
 
Thanks heaps guys.

Sounds like i've got some research to do.

I am leaning now towards holding onto the property and trying to purchase 1 or 2 more IP's.

I guess it will only cost me the $1000 advertising i have already paid the reall estate agent but thats not to bad, i'm sure people have lost a hell of a lot more!!

Now i just have to get the guts to call the agent and tell them to take it off the market!

Thanks again
 
Well I wouldn't use the word "stuff up"

Perhaps some people would disagree with what you've done. But you know what, reality is those same people probably didn't have half your achievements when they were 27.

Oh one thing to add in the edit. I don't understand all this crap about goals. Do what your heart says or what you think is right. If people giving you advice were that good, they'd be this man called Warren Buffett. Check wikipedia to see who he is.

What you really need is just more confidence in what you're doing.
 
Top