Sell or Rent?

Discussion in 'Property Investment - Other' started by agitated, 20th Jun, 2009.

  1. agitated

    agitated Member

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    Hi everyone, just joined and Trying to research whats the best thing to do for my current situation.

    We have just moved into a rental property (paying $580 a week for a 4 bedder) in a suburb we wanted to live in after being in our PPOR for the last six years (in chipping norton), in which we still owe around $270k. We're in the process of finding tenants for PPOR (have 2 applicants but the RE is unhappy with them as he thinks they wouldnt maintain the place properly), but considering the possibility of selling it and using the money to buy a smaller ip with very minimal debt.

    If we were to rent it out, we would get around $470 a week. Selling it now would probably net us around $170k after all fees have been taken out.

    So not sure as to what to do, sell it and use the money to buy a small ip or just rent out the existing ppor?

    I'm the only one working at the moment (my wife is a stay at home mum) im thinking minimising our debt might be a better option until she goes back to work....
     
  2. travelbug

    travelbug Member

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    Hi, big decision.
    You need to look at the numbers.
    If you will have $170K and you want a debt less than you have now ($270K) so I'll guess a debt of $200K

    That means you will have to find a PPOR for $170+$200= $370 minus charges.

    so about $350,000. Not much. Do you want to live in an area with that price PPOR? It doesn't sound like it if you're paying $580 rent.

    You lose a lot buying then selling again.

    Without knowing all the info I think I'd hang on to what I have.
    $580 is a lot for rent plus your mortgage shortfall. But at least you get tax benefits.

    Others might have a more creative solution.
    Good luck.
     
  3. wylie

    wylie Member

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    Without knowing many of your details, my first thought is to keep the old PPOR if you can because to sell and rebuy will cost a lot of money, so I would be trying to hold onto the one you already have, if it is not a bad house or a bad area.

    Even if you keep it for a year, and then decide it is not working financially, you could look at selling it then.

    I understand your wife wanting to not be forced back to work sooner than either of you want, because I am a stay at home mum too.

    Have you only moved to be in a more desirable area, or is there a problem with the old PPOR. Can you survive without selling it? Could you see how you go and possibly rent for less yourselves? Just throwing out some ideas.
     
  4. agitated

    agitated Member

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    We've just moved to be in a more desirable location, locked into a 12 month lease so guess we cant go cheaper for now. My sis-in-law just moved in with us as well so we'll be getting $150 a week from her so that will lessen our load. With my salary around the mid $90k i dont imagine we would be struggling too much.

    No problems with our current PPOR, We would be positive gearing the house if we leased it out since i have a LOC loan on it at the moment and rent would be more than the payments with the current interest rate.

    My thoughts are to sell to the PPOR, buy a unit closer to the city for around $220k and rent it out.

    What are the major things to look out for when selling then buying again?
     
  5. wylie

    wylie Member

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    First things to spring to mind are agent fees for the sale, and stamp duty and other buying costs for the purchase. If you can hold onto the existing house why incur the costs to sell and buy?
     
  6. Propertunity

    Propertunity Real Estate Buyers Agent

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    Mostly the gurgling sound of the great wads of cash getting flushed :eek:

    Which is why a lot of forumites don't recommend it (me either).

    Why incur REA comms to sell & then stamp duty to buy + legals (in & out) + loan fees etc especially when the old PPOR turned IP is cf+ :confused:
     
  7. Propertunity

    Propertunity Real Estate Buyers Agent

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    Just looking at your numbers, you have an old PPOR worth about $450K on which you only owe $270K. The $470pw rent you get more than pays the mortgage on this one.

    If you wanted to buy a 2 brm unit for $220K you'll only need say $50K for a 20% deposit and stamp duty. Any lender will stump up the other 80%. The $50K you can easily get out of the equity of the PPOR. (You have $180K of untapped equity in it). Go buy a cf+ unit in Auburn or somewhere like that.

    You are in an excellent position to do that.
     
  8. HandyAndy888

    HandyAndy888 Member

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    I agree..keep the property, use the equity to buy again.
     
  9. agitated

    agitated Member

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    Thanks everyone for the advice. Sound's smart to keep the old PPOR and rent it as it will be CF+, as i wont have anything to lose really. Now just have to figure out how this equity thing works, feel like a total newb at all of this :confused:

    On another topic, I currently have a LOC on the mortgage, do i need to refinance to make it a IO offset account for easy management? or can i continue to use the LOC? From what i researched the offset account is the way to go, but if i refinance will i still have access the funds that ive already paid off incase of an emergency?
     
  10. RumpledElf

    RumpledElf all fun in the big city!

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    Heh. I'm selling my old house and throwing away a LOT of money in agents fees etc even though it would be very cf+. I can't get the equity out any other way, and I *need* $10,000 so ... no choice :(

    Keep the house, its not like its bleeding money or anything.
     
  11. Propertunity

    Propertunity Real Estate Buyers Agent

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    ag, post this Q in the Finance section of the forums and a MB/MBs will give you some options.