Should I sell this lemon!



From: David Brady

Hi all,

10 years ago I bought a block of land across the road from a waterfront block in Smiths Lakes near Foster,NSW for $42K. My worst property lesson - never buy a non income producing investment!!!

Prices have gone big time backwards, after being for sale for the last 3 years I finally get an offer from the agent for 25K which I was able to squeeze up to 26K. Apparently another similar positioned larger block sold recently for 25K - so the price is probably about right.

Growth in the area is still 0% according to Domain.

Hate losing this sort of money, which you could probably double with inflation and council rates - not to mention the interest over 5 years to pay it off.

I will probably take out the emotion and cut my loses.

Anyone with local knowledge out there advise me to do otherwise.


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Reply: 1
From: Michael G


Are there people around who would like to live there, is it a nice spot?

Idea: relocate a house onto the block and lease/option, wrap, vendor sell the house and land to someone at a price that recoups all your money.

Note: I do not have experience in relocating homes.

And if you didn't want the hassle of managing the wrap/lease-op contact a wrapper and become the investor in a joint venture agreement and split the c/f with someone to manage the thing on your behalf.

Michael G.

never hurts to ask!
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Reply: 2
From: Rolf Latham

Hi David

Lesson 1. There is no worst lesson. Learn and move on, everyone makes educational investments at some time.

Thats a very nice location. I love the Myall Lakes.

Me feelest you have answered your own question, even more so if:

1. You owe money on the block or
2. You are in a position to make better use of the equity for a better quality asset. I mean 25 k could buy you a 250 k house somewhere.


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Reply: 2.1
From: David Brady

Thanks gents,

Have owned this outright for over 5 years, but the council/water rates are murder at over $1200 - valuer says it's worth $35K???

The relocatable home idea would be good but for the slope, more trouble/expensive than it's worth.

Money is better sitting elsewhere, even simply against my offset would be worth $1500 pa.

Just in addition, could have bought a 1br unit for $34K in Campsie tenanted same time. Mum didn't think it was 'nice', same unit probably worth $150K+ now, bugger me!

Anyway thankfully we live and learn.

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Reply: 2.1.1
From: Dale Gatherum-Goss

Hi David!

On top of the advantages of cutting your costs and having money to invest in a new IP, I'd also remember that a Capital Loss has some value to you.

This is because you can carry forward this loss to offset against any future Capital Gains that you make. It may not be much, but, I'd take every benefit that you can squeeze out of this deal.

Good luck

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Reply: 3
From: Greg Mitchell

Hi David

I don't know the Smiths lake area well but I have property at Hawks Nest, bought it 3 years ago the property has doubled in value, I'm surprised every time I get a valuation.

I put it down to the new freeway, peoples desire to get out of the the city and a need for a lifestyle change.

Smiths lake is in that 2-3 hours drive out of Sydney and 1/2 hour out of Forster giving it great potential.

Domain only tells you history not the future, have a talk to the council, main roads etc... before you sell, otherwise selling may be the greatest mistake!!!
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Reply: 3.1
From: Donna Larcos

Never sell the land! That's my motto. If a
valuer will give you $35k on it, use the
equity to buy elsewhere, preferably
something with good rental return that
can help with cashflow. Later you can
build something simple on it. If the land is
sloping try putting a 1 br flatette
underneath and a 2 bedder on top - may
increase return. Demographics for the
area say top two groups are lone persons
and couples without kids so small is OK.
30 years from now you may find its a nice
place for a holiday cottage for yourself or
your kids and you'll be laughing at $42k.
Check with the agents what rental return
for area is and vacancy rate.

Growth can be tricky. We had a block in
Vincentia near Jervis Bay. We bought in
1988 and watched more than double in
the next three years to around $60k
However, had we bought it 1991 at $60k
we would have seen it do absolutely
nothing until about 1999 when there was
very slow movement about 1-2%. Then
prices shot up 25% over the next 18 mths.
It's not like Sydney where the growth is
relatively steady and, as someone said,
Forster is in the magic 2-3 hours range
from Sydney.
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