Next steps... Sell or just buy more??

[Elke]

We have 2 Ips in Wollongong, no PPOR coz we rent, and that's it for IPs so far. market there is at 'peak' accdg to HTW, there's 45+ groups at every open, sales are frequently over asking price ATM.

Debating whether to sell one. But why? Or why not??
The Issue is our strategy.
What 'strategy'???

We have a goal to have a passive income of 35k pa by end of 2022 thru resi real estate.

Both IPs are basically CF neutral.

At this early stage, we want to buy IPs that are about CF neutral bec it suits our risk comfort level at this stage.

Dunno dunno... What's to be gained by selling? What's to be gained by keeping?? After selling n paying off all debts, we'd have 100k. If we get equity off it, we may access about 50k. Our PM just emailed us to say she has two buyers for one of the IPs. We dunno!

What do you think???

Thoughts welcome.

 

[The Fence]

How old are you?

What is your strateg...ok forget that.

Sounds like you are being tempted by this latest wave of sellers market.
Also sounds to me you have only just begun.

Therefore you need time in the market to consolidate and yes, buy some more.

Can you do any renovations to make more rent $$ ?

I'd be doing that and get these IP's CF +ve, then access equity and go again.

But if you are well over 50yrs old then sell !

Id also be buying a PPOR to live in as that will be tax free when sold so you can buy that caravan and go wild!

 

[Jess Peletier]

We really need to know a lot more about your plans for the future to comment properly, and I think you need to look a bit more closely at your strategy - having a goal of $35k passive is great, but unless you have a plan to get there it's a bit hard to know what to do. I think if you answer the 'how' question you might find the answer to the post question yourself.

Are you ever going to buy a PPOR? Do you have any cash at hand? Knowing your goals outside of investing would also help to clarify your situation. Will wifey leave work at some stage for kids? These are all things that need to be considered in your decision making.

If you're going to sell, you want to have a proper 'reason'. Can the funds be put to better use elsewhere? What's the outlook like for the current IP's further growth/yield? As the Fence said, can you manufacture some equity to improve either of those things?

So much to think about

 

[Redom]

We have 2 Ips in Wollongong, no PPOR coz we rent, and that's it for IPs so far. market there is at 'peak' accdg to HTW, there's 45+ groups at every open, sales are frequently over asking price ATM.

Debating whether to sell one. But why? Or why not??
The Issue is our strategy.
What 'strategy'???

We have a goal to have a passive income of 35k pa by end of 2022 thru resi real estate.

Both IPs are basically CF neutral.

At this early stage, we want to buy IPs that are about CF neutral bec it suits our risk comfort level at this stage.

Dunno dunno... What's to be gained by selling? What's to be gained by keeping?? After selling n paying off all debts, we'd have 100k. If we get equity off it, we may access about 50k. Our PM just emailed us to say she has two buyers for one of the IPs. We dunno!

What do you think???

Thoughts welcome.

IMO if your getting more than what you believe to be normal market value and have a good local knowledge, i can see large benefits in selling.

You'd have to run through the numbers carefully (tax, etc) - but as with all cycles, it wouldnt be entirely surprising to see stagnation/some movement backwards after a boom. Realistically you can take away an extra 50k by selling and divert it to other markets that are just starting.

Measure the opportunity cost of not selling - e.g. your extra 50k in usable equity could be used to purchase an additional IP in a rising that may move 10-30% over the next few years if you buy well.

Cheers,
Redom

 

[Richard Feynman]

If you sell, you lose a growing asset and growing income stream which is costing you nothing to retain.

The only reasons I could see this would help move you closer to your goal of 35k passive income in 7 years is if you can't borrow any more to invest further and/or you could redeploy the funds (after sale) into other asset(s) which will produce a greater return between now and 2022.

 

[Redom]

If you sell, you lose a growing asset

This may be true over a long horizon, but it may not be in the short to medium run. You sound as though you think the asset may not grow in value and the market may be near the top.

If holding onto the property stops you from purchasing in another growing market, than selling may be a worthwhile option.

Some preach 'the velocity of returns'. So while holding onto the property may mean you'll win again in the next cycle in 5-10 years time, you could move your asset base in to something that may win in 2-3 years. The end result of doing so may mean you get to your 35k passive income goal quicker.

I'm just using broad strokes to paint a picture of when selling may be appropriate. It may or may not suit depending on your view of where the markets at and what you could do with the additional funds.

Cheers,
Redom

 

[knightm]

We have 2 Ips in Wollongong, no PPOR coz we rent, and that's it for IPs so far. market there is at 'peak' accdg to HTW, there's 45+ groups at every open, sales are frequently over asking price ATM.

Debating whether to sell one. But why? Or why not??
The Issue is our strategy.
What 'strategy'???

We have a goal to have a passive income of 35k pa by end of 2022 thru resi real estate.

Both IPs are basically CF neutral.

At this early stage, we want to buy IPs that are about CF neutral bec it suits our risk comfort level at this stage.

Dunno dunno... What's to be gained by selling? What's to be gained by keeping?? After selling n paying off all debts, we'd have 100k. If we get equity off it, we may access about 50k. Our PM just emailed us to say she has two buyers for one of the IPs. We dunno!

What do you think???

Thoughts welcome.

I don't think Wollongong is at peak yet. Just my opinion. You should definitely spend some time thinking about strategy. That is important. Individual decisions like this become much clear once you have done that.

 

[jpcashflow]

Hi

Hi,

I always have a mixed portfolio of properties to keep and sell.

What is the point of holding onto a property that has grown X amount in a year?

Investing and business is all about buying at the right time and selling at the perfect time.

Also one thing to consider is this, once you sell how will you use your funds?

Just you look at the following when selling:
eg: if you sold and made 100K, How much would you Net after the following?
- Real estate fees, Banking breaking cost if any, Capital gains tax, solicitor fees?

If you only net 40 or 50K after selling the property it might be a good idea to keep it .

Just have a look and talk to a broker and accountant...

 

[Richard Feynman]

Ahem.

If you sell, you lose a growing asset and growing income stream which is costing you nothing to retain.

The only reasons I could see this would help move you closer to your goal of 35k passive income in 7 years is if you can't borrow any more to invest further and/or you could redeploy the funds (after sale) into other asset(s) which will produce a greater return between now and 2022.

This may be true over a long horizon, but it may not be in the short to medium run. You sound as though you think the asset may not grow in value and the market may be near the top.

If holding onto the property stops you from purchasing in another growing market, than selling may be a worthwhile option.

Some preach 'the velocity of returns'. So while holding onto the property may mean you'll win again in the next cycle in 5-10 years time, you could move your asset base in to something that may win in 2-3 years. The end result of doing so may mean you get to your 35k passive income goal quicker.

I'm just using broad strokes to paint a picture of when selling may be appropriate. It may or may not suit depending on your view of where the markets at and what you could do with the additional funds.

Cheers,
Redom

Glad we cleared that up

 

[Redom]

Ahem.

Glad we cleared that up

Haha sorry mate, I realised I repeated you after re-reading your post.

 

[Ausprop]

if all you want is $35k in 7 years just do nothing, your rents will rise by that much from inflation. That was easy huh? and you haven't had any cash drain waiting for it.

 

[Jess Peletier]

if all you want is $35k in 7 years just do nothing, your rents will rise by that much from inflation. That was easy huh? and you haven't had any cash drain waiting for it.

And that's the thing with the selling and rebuying - costs to sell and then costs to buy. When you consider stamps, lmi etc on the new purchase it often doesn't seem quite so attractive.

 

[knightm]

Both IPs are basically CF neutral.

I see no major reason to sell at this stage given my previous comment re market. If you want to purchase more then refinance them to 80% and buy something with decent CF somewhere else to keep the CF neutral going. With CF neutral now they will likely improve in income production quite a bit by '22 as mentioned by Ausprop.

 

[Richard Feynman]

Haha sorry mate, I realised I repeated you after re-reading your post.

All good mate.