Sell or hang on??

[happy]

OK, so I got 7.9% as well. I didn't know that it is worked out on the current estimated value, not the original purchase price.

Thanks for pointing that out

I guess that figure looks great but doesn't take into account the fact that it has dropped in value by around 40-50K. I know this loss is only realised if he sells it.

Now I'm confused and don't know what to advise dad.

 

[VYBerlinaV8]

If it were me, and I was getting 7.9% yield, I'd keep it (given it should be cashflow positive) and wait for the growth.

Others may wish to sell it and find a better investment, however you then need to actually find that investment, as well as manage the costs of selling and then buying something else.

HOWEVER - get some other opinions and make up your own mind. This is just what I would do given my view of the situation.

 

[weg]

Happy, can I ask who did your valuation? Or did your father base it on the sale of other apartments?

If so he needs to be sure he is basing the valuation on an apartment with an expired lease.

As VYb stated the value of the apartment with no lease will be different to one with a long lease and conditions attached.

An independent valuation might be the way to go.

 

[wobbycarly]

Thanks for your interest guys...

I have since found out that dad is not under a contract to do anything with Waldorf - they are simply managing the unit and guaranteeing weekly rent. His contract with them ran out long ago and now he is free to do what he likes with the unit.

Dad says he gets about 6-7K tax break from the unit. I have estimated that if he takes over management of the unit and earns an extra $140 per week (approx what Waldorf takes in management fees!), he will earn an extra 6-7K per year.

So, is there an advantage to trying to increase the net yield by managing the property himself, if he looses the tax break? The way he sees it is, he can either take the shitty rent and the good tax break or, manage it himself (includes extra work, worry etc), make more money, but loose the tax break.

If he sells the property now he will loose around 50K. He obviously doesn't want to do that. Financially, he can still afford to buy property without having to sell this one - so it's not limiting him in any way.

So what would you do if you owned this IP? Are there any more creative ways to improve it's performance? Or should he get out of it now, take the 50K loss on the chin (should include a great tax advantage?) and put his money into something better?

Thanks again!

Rather than "self-manage" could this be leased through some other manager, and hence no "extra work, worries". Possibly still be able to raise the rent, (let's say $70/wk net?) and not forgo all the tax break. Some of that tax break will be from costs that won't change, such as rates and insurance, and possibly also some depreciation.