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From: Mike .


Should I sell this property?
From: Darren
Date: 5/4/00
Time: 9:24:57 PM

My second house purchase in 1990 was a house in Narre Warren (45klms from Melbourne) for $116,000, in which I lived in for a short time. I had it first rented in 1992. Currently it rents for $160.00 per month.

A recent agent evaluation, as I am thinking of selling it, was $108,000. Their is unlikely to be any future capital increase in the next few years.

Should I keep, or should I dump this non performer. I agree with the principle of buy and never sell, but should I cut my losses on this property.

It hasn't been a total disaster as I used the small equity in it to purchase another property which has gone up in value by $60,000 in 18 months, and thus leveraged to buy another 2 IPS.

Their is no more equity left in it - it has been all used up and is now cash negative.

Any opinions appreciated.
 
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Andrew S

Reply: 1
From: Mike .


Re: Should I sell this property?
From: Andrew S
Date: 5/7/00
Time: 9:07:08 PM

Hi Darren,

I would be intrigued to know what part of Narre Warren your property is in. Some parts of Narre Warren have in fact produced quite good growth eg 25-30% in some areas north of the highway, in the last 12-18 months.
 
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Darren

Reply: 1.1
From: Mike .


Re: Should I sell this property?
From: Darren
Date: 5/7/00
Time: 10:11:26 PM

South of the highway in Saxonwood drive.
 
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Drew

Reply: 1.1.1
From: Mike .


Re: Should I sell this property?
From: Drew
Date: 5/4/00
Time: 11:46:36 PM

Having been in this position before I learnt the virtue of patience. I went to my lender and suggested they give me a pre-approval to purchase again and substituting the security. After weeks of deliberation they agreed (I initially went to them with cash flow projects and a plan).

I then (after 14 weeks) found a property and negotiated a cash contract (pre approvals come in handy) where the vendor then rented back off me for 12 months. It was a risk but with a little research it paid off.

The new property appreciated by a considerable amount in the next 2 years and this helped us to gear up into more property. The 1st property cost me in excess of $14,000 in 12 months just in the difference between buying and selling so as you can see I cut my losses and learnt from the experience but in the long term it has proven to be very profitable.

I still have the same tenants (original vendors) and that was 15 years ago! Some things are learnt by experience alone and maybe it would be best to cut your losses because always remember when one door closes another one always opens.

Cheers Drew
 
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Andrew G

Reply: 1.1.1.1
From: Mike .


Re: Should I sell this property?
From: Andrew G
Date: 5/4/00
Time: 10:17:22 PM

If you believe in "buy and never sell" then don't sell. You have to back your theories with actions other wise you will jump all over the place and never be happy.

You are only getting 7.7% yield on the property (not exactly huge). I would be expecting a little more from an area not expected to grow in the next few years. Check into getting more rent out of it.

As to whether you should sell...I don't know your situation well enough. What are the advantages to selling? What will it free you up to do? What are you trying to achieve? By when? Knowing where you are going is vital to knowing how to get there.

Have fun, Andrew.
 
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Darren

Reply: 1.1.1.1.1
From: Mike .


Re: Should I sell this property?
From:
Date: 5/5/00
Time: 12:04:38 AM

The reason why I wish to sell, is so I can take that mortgage & invest in a property closer to the city,in the unfashionable Melbourne west, which is predicted to boom in the future, due to the better road network (Citylink) on a large block, with the potential to do a subdivision/dual occupancy in the future.

Regards, Darren
 
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