should i hold or sell with loss??

Hi All,

In the peak of the boom in 2003 i bought a unrenovated 2br fibro house (12.12 X 45m) in the western area of sydney for 346k(borrowed 350k). Several months later interest rates rose twice. This was the beggining of the deflation of the sydney bubble... I was initially keen to jump in to the property market and im the first to admint that i didnt research properly. I was left stuck with a property on a street far from station (4min drive) and with some housing commision on my street. 2 weeks after my purchase my direct neighbours sold for 375 and 395 however now I have not been able to sell ir for even 340k... I payed 10k renovations and over 10k stamp duty plus i borrowed 100%. This was an inestment property and is currently returnuing 860 a month.

I would love some advice on where to go from here.. it has been on the market for 1 year now.
'''should i do some more renovations ( eg.. drievway and landscaping) and try to resell
''''should i sell it even if i am left with a 10-15k mortgage?? and buy something else...
should i hold onto it????

Any insight would be great... Thanks

under a 3% yield means you are making a BIG loss, unless you are in a high income tax bracket in which case you might be a little better off. If you are heavily negatively geared are you aware you can use a PAYE tax variation so that you can reduce your tax each pay to increase your cashflow?

Based on where the economic cycle appears to be for the Sydney property market, I would suggest that you may be looking at some time of negative gearing, perhaps years, before either the rent returns equal your loan repayments or the equity exceeds the debt.

I think your choice is to either:

1) Adjust tax for cash flow, buckle down and reduce loan as much as possible and hang on to it so to ride out the cycle

2) Sell up, cut losses and you will make a capital loss so might get some tax back anyway (small relief)

I did a similar thing when I bought my first home in Brisbane in 91, bought at the peak of the boom, went up for 1 year and then went down until 8 years later it was worth two thirds what I payed for it.

I think it is worthwhile taking a long term view on this - if you sell you can move into another investment market like shares etc, but if you keep it you can recover, you are just slowed down. Does this property stop you buying others? There are probably better yielding properties perhaps already.....

If you take the long term view, in my case my first house was a stuffed investment, but over a decade later I have 12 rental properties so I dont really care.

You are probably going to have most peace of mind by accepting where the market is and where you are with your investment, and making a decision based on a 5-10 year timeframe.

Hope that helps...

Disclaimer: This is all my opinion, dont rely on it as financial advice.
Hiya Georges

A lot comes down to how much tax you pay as well, and mainly as already said - time heals all wounds.

Find some way to hold, can you add a cheap dual occ to the block for eg


Ouch!!! :eek:

Your return on this property is (and more than likely, was from the onset) very disheartening to say the least at 3%. :( Notwithstanding renovation costs, or any other associated purchasing costs (ie. stamp duty, mortgage insurance etc) I would have to assume here that you really didn't do your homework on this one George. :eek:

The fact that it has been on the market for a year, when neighbouring properties are selling around you is a bit of a worry. What sort of feedback are you getting from people inspecting the premises???

What makes you think that doing more renovations will make this property move??? Are the ones you have done already not sufficient to give it the appeal to offload it??? If not, what sort of renos did you do???

As to the "sell or hold" argument, this depends on various considerations that you need to address, ie. your financial situation - are you able to hold onto it comfortably without compromising your serviceability, are you receiving any kind of tax benefit by holding onto the property, what is the location of the property, that is - are the growth trends on the upward climb??? I think you need to do some RESEARCH on the area you bought into, as well as just haivng done renovations on a property, in which you obviously did not.

Without knowing too much about the property or your situation (including your long term investment goals) it is difficult (as an outsider) to offer any constructive criticism, and even if I could, the deciding factor as to what you do with it, is your call to make.

Good luck with it, I hope it works out well for you. :)


Well I have a HECS debt as i only finished uni several years ago and this as well as the second highest tax bracket i find myself paying over 50% tax. Theo only positive of this property is that it is so negativly geared that it returned me 11k tax return. 5.5k of which went to hecs. Do you think it would be better to fill in the relevant tax forms and have witholding tax paid everyfortnight or just wait for the end of financial year???


Im glad that your first investment was a dud and you now have 12 rental properties. I dont feel as bad now...


I was in a rush to buy a property and i have learnt from my mistake. Research is very important!!!

The houses directly beside me sold shortly after i bought my property when the market wasnt as gloomy as it is now. The investment property is in a sydney suburb called chester hill..

76% of the mortgage is interest only whilst the other portions is capital/interest.

The repayments are around 30-35% of my pay..

p.s the house is in sydney suburb called Chester Hill.
OK, let's look at some options - at 30% of your pay, serviceability on anything else is going to be a problem. Time to put that brain into gear and think how you can up the rent. How does the current rent compare to market? Is there something you could add that would justify a rent rise? New fence? New Room? Cable TV connection (tenant pays contract costs, but you pay for the cable/dish)? Maybe a wrap contract - sell the house to the tenant?

Just try and think of as many options as you can and maybe something doable will leap out.
Chin up GeorgesA ...

There would not be too many folk here who have not at one stage been wrong footed with investments. I flopped with some geared managed funds a while back and am now playing catch up. Ho hum. I still own my house outright and have a vacant block and part ownership in another house/land. Call it a learning experience - you'll bounce back from this and be a better invester because of it. I am planning to build on the vacant block as soon as I have 'corrected' the funds disaster! Life goes on ... Best, Gabriel PS. re hold or sell - I now have a very good financial adviser & can recommend from my experience that quality advice is worth its weight in gold
Err! Isn't this the "exhuberence" that conservatives warned about?

A few more stories like this and maybe the "borrow all you can, property is the shortcut to wealth" clan will apologise for their misinformation and maybe pigs will fly.

Gabriel Conroy said:
I now have a very good financial adviser & can recommend from my experience that quality advice is worth its weight in gold
Agreed!!! Professional advice is definitely something worth considering George. :)

By all means do take the time to research (as Quiggles suggested) the rental market in your area, maybe increasing the rent at least in the interim, whilst you are hunting down a reputable financial person that can offer some expert advice on what best strategies to employ.

FWIW....yes even the most savvy of investors have made blunders at some point :eek: and although painful at the time, are great learning experiences that will serve you well in ensuring you not make the same mistakes twice!!! ;)

All the best, :)


if you decide to go down the tax road you can download a PAYG variation form from here:

If you can get $11k tax back it is not looking so bad, by the time the tax benefits wear down your rent will be up and equity improved, however, I would probably also consider the total investment from a longer term perspective. Perhaps the learning curve from this will be of signficant benefit over time, some of my best learning is from painful mistakes. SOmetimes you can read all the right stuff but only learn from experience, and then retrospectively fit the theory!


Thanks to all

Professional advice... mmmm this is a thought but I really can they really think of things that we cant??? I mean do they just re assure us or do they actually come up with plans and ideas??? Also how are they paid??? per hour or commision???

So from experience no one can really say whether its worth selling and accepting the 10-15k owing on the mortage or whether I should hold on to house untill i can break even??


it is impossible to say whether you should hold or sell, because what you are trying to ask is:

"What would my best financial move be, to sell and do something else or to keep it?"

Now the problem with that is, that you are introducing a question with a variable but assuming there is a non variable answer. So if you instead asked should I sell it and do X,Y and Z or hold on to it for X years, then you are narrowing it down.

The best you can do I think is to:

1) Fully understand the current position you are in financially for the next1,3,5,10 years if you hold

2) PRoject figures and do some sums and research on the above

3) Compare that to alternate investments that you might consider

4) Asses this against your own requiremetns like risk profile, personal goals, sleep at night factor, personal preference. etc

We have a guy at work who bought a block of land for $50k at Harvey Bay, it is worth over $100k now, he cannot afford to build on it but doesnt want to sell. He gets no income from it, but feels it is tangible. Is he wrong? The answer is what is the financial impact to him holding, and what is his personal preferences.

Also I have always though financial advisors and professionals etc were not worth the money, but I am now writing a University teaching unit in retirement and investment planning, I think unless you do the research yourself (which I personally love), then you are better of financially getting advice, but from a range of people.

I know you want an opinion on whether you would be in front to sell or hold, but it just is not that straight forward. One thing I did though was decided that if I simply kept my first property, it would eventually make money. It did, and so that worked, it was not the faster thing in the world, but time healed all wounds.

Perhaps it is worth understanding that there is a financial and a personal decision based on your investment style here.

This is just my opinion.

- Sit down with a professional and get proper advice
- Exhaust every avenue you and any one else can think of
- Reduce it to numbers. Get rid of all the emotion. The best thing might be to take a hit, but if you are emotionally caught up then you may not see it
- You need to make the end decision in my opinion. The reason is that you need to get the lesson. Believe me the lesson is worth something.

I went into a business once that went pear shaped and I lost some money and found myself in debt. I was running around trying to put out the fires until one day I realized that I needed to take the hit, as I was digging a larger hole for myself. I took the loss and I really learnt a number of lessons.

I’m not saying that you should take a loss. This is not advice at all, this is just my opinion. There are many examples of people who have lost money before they made it.

Good luck with it.

Panda said it best - you might need to take the hit. Tought but true.

Why? Because you've got a 3% yeild on your hands and that's just crazy. You bought bad and the only way out is to sell or hold long-term and ride it out until the next boom, as Tim mentioned. Yeh could also try to raise the rent to increase your servicability but its a drop in the ocean - ie, probably won't make much difference.

Bottom line - there's some real good suggestions below on how to analyse your situation in order to get the best result. Don't make the same mistake of not doing your research.

Good luck.

THe other thing you could consider is, disregard the paper position of a captial loss (if you sell), and simply focus on the cash flow position.

You dont make a loss until you sell, and if many market segments are not going up, then that makes a difference, it is not as though it is easy to rush into some other property that will go up overnight at the moment. Do the sums on cashflow over 5 years, by which time it may have gone up or be going up, how much will it cost you to hold for 5 years?

How does that compare to selling and investing in another property or sector?

RichardC said:
Err! Isn't this the "exhuberence" that conservatives warned about?

A few more stories like this and maybe the "borrow all you can, property is the shortcut to wealth" clan will apologise for their misinformation and maybe pigs will fly.


Gee , great stuff Dick...... :mad:

It comes down to everyone doing their own research which Georges has already admitted he didn't do. It takes a lot of courage to come out and say you stuffed up , and ask for advice on an internet forum.

The forum , and Georges need posts like this , and any constructive comments so he can learn and other people can avoid the same problem.

Some of the people in WA might be wise to read this post at the current time.

See Change
So from experience no one can really say whether its worth selling and accepting the 10-15k owing on the mortage or whether I should hold on to house untill i can break even??
i would hold this property, thats the problem everywhere
some of the houses in the area im working in have been on
the market for ten months,most are renos who overspent
and now face serious problems trying to sell,and this ia a area 6 klms
from the cbd,but in your case its only time and,the first 100k profit
in property is always the hardest to make, but once you make the rest is easy.
good luck
George, does the property serve a higher purpose. ie is it able to be considered a development site. This could give it more value either to yourself or a prospective buyer. Are you able to let it out by the room to achieve a higher yield. (This does come with its own set of risks, but might make it more worthwhile for you to hold on to)

At the end of the day, only you can decide whether or not to hold onto this property. Do your sums & if it turns out it is not within your risk profile, then you may have to sell. But on the other hand if it does have some good prospects you may decide to ride the storm & hold out for the future.

Best of luck with a hard decision.
Enquire about the cost of converting your P&I loan to Interest only. This will reduce your monthly repayments and the whole amount will be a tax deduction (I take it that your current loan is P&I from what you infer above)

Check council regulations for building an attached dwelling (granny flat) that could be rented out separately. Some councils allow you to park a mobile home in a back yard, as long as you pay a holding bond to guarantee you will remove the home within 5 years. Renting both out will obviously improve your yield if you can get more rent than the cost of interest to acquire the second dwelling.

Consider dumping the property manager and doing the management yourself. This will save expenses. If it is close to a university, consider renting it to groups of students from overseas. You can often get better yields with student accomodation.

If it has a sizeable secure garage, consider advertising the garage as commercial storage space. Some small businesses and private individuals are always looking to store stuff on a long term basis. (people going on extended OS holidays who don't want to pay rent when away) Be sure to come to an arrangement with the current tenants though re regularity of access.

Lastly, look at the opportunity costs of continuing to hold until the market moves. A third of your wage can service a lot of debt that could be put into managed funds. Many here tout the Navra Fund and its performance has been good for the 2 short years of its life.