Should I sell ?

[Bez]

Hey guys, I was having a look on the www.onthehouse.com.au site that Aimjoy posted up the other day and its got me thinking..

I bought a 2 bedroom unit in Taree 12months ago for $125,000.. It has been tenanted for $155 p/w and ends up costing me about $3000 a year to hold after tax (P&I Loan)

Anyway www.onthehouse.com.au said it had sold in 2004 for $130,000

Im starting to think that it might be worth selling and putting my money else where..
Given the $7500 in purchasing costs + the $3000 if put in to hold it id have to sell the unit for $135,500 just to break even right ?

What do you guys think ?

 

[alexlee]

Hey guys, I was having a look on the www.onthehouse.com.au site that Aimjoy posted up the other day and its got me thinking..

I bought a 2 bedroom unit in Taree 12months ago for $125,000.. It has been tenanted for $155 p/w and ends up costing me about $3000 a year to hold after tax (P&I Loan)

Anyway www.onthehouse.com.au said it had sold in 2004 for $130,000

Im starting to think that it might be worth selling and putting my money else where..
Given the $7500 in purchasing costs + the $3000 if put in to hold it id have to sell the unit for $135,500 just to break even right ?

What do you guys think ?

The P portion is actually reducing the loan balance (probably about 2,500?), so it really shouldn't be considered a 'cost'. If you count that as a cost you'd have to count putting money into a savings account as a 'cost' as well.

Do you think there is a better investment elsewhere? What were you expecting when you bought the property? If you keep getting in and out you won't really make anything unless you get really lucky.
Alex

 

[willair]

Anyway www.onthehouse.com.au said it had sold in 2004 for $130,000

Given the $7500 in purchasing costs + the $3000 if put in to hold it id have to sell the unit for $135,500 just to break even right ?

What do you guys think ?

May be hard to make any money on this one,with the exit costs,legals,tax,agents comm,maybe it's a bit early to sell..imho..willair..

 

[MarkB]

I bought a 2 bedroom unit in Taree 12months ago for $125,000...

Patience grasshopper, patience.

Though, personally, I'd ditch the P&I loan quicker than you can say:

"holy less-than-optimal-financial-management, batman!".

M

 

[yo yo ma]

Though, personally, I'd ditch the P&I loan quicker than you can say:

"holy less-than-optimal-financial-management, batman!".

LOL
ie: Switch the loan to interest only, if you decide to keep it.

 

[Bez]

At the time of purchase I thought having something is better than not having anything..
So i pretty much bought what I could afford, thinking it will go up in value. I wasnt expecting a lot of CG being in Taree but if it stayed flat or droped for another 4-5years id be pretty dissapoined..
I only earn $34k pa so the holding costs do make a dint, and its currently without a tenant.

Im thinking id be better off with putting my money into shares or managed funds as there is no on going costs or large purchasing costs..

 

[HandyAndy888]

"holy less-than-optimal-financial-management, batman!".

M

lol... Nice one...

 

[alexlee]

At the time of purchase I thought having something is better than not having anything..
So i pretty much bought what I could afford, thinking it will go up in value. I wasnt expecting a lot of CG being in Taree but if it stayed flat or droped for another 4-5years id be pretty dissapoined..

Turn it to IO and that will 'save' you $2k a year. A year really isn't enough time to judge. You don't know what's going to happen in the next 5 years.

I only earn $34k pa so the holding costs do make a dint, and its currently without a tenant.

That's a bigger problem. Is your rent too high?

Im thinking id be better off with putting my money into shares or managed funds as there is no on going costs or large purchasing costs..

How do you think a share portfolio would have performed over the last 12 months?
Alex

 

[Dave Hooper]

A year really isn't enough time to judge.

True, but my research shows me this area has done nothing for the past 3 years.

This of course does not mean you should sell, this year may be the year it takes off again.

 

[evand]

The chances of it taking off this year are remote at best. The chances of it being flat or negative for quite a few years ahead are pretty high. Not good when its costing you money.

I look at investing not in the sense of 'will it happen or not' but 'what are the chances of either scenario eventuating' and if the negative looks much more likely than the positive. Its not an investment its a liability. Not to mention the opportunity cost. So my advice is toss it and move on.

Also, a regional town investment Taree is pretty ordinary.Very low socio economic with lots of problems.

I'd dump it and come back into the market when things look better. If you have to eat a small loss its a good chance its going to be smaller than what its going to cost you down the road if you keep it.

True, but my research shows me this area has done nothing for the past 3 years.

This of course does not mean you should sell, this year may be the year it takes off again.

 

[mam544]

Im thinking id be better off with putting my money into shares or managed funds as there is no on going costs or large purchasing costs..

And you will also have no leverage.

 

[dreaming]

It's hard to do it with such a small income but buying and selling in such a small amount of time is very uneconomical. If you went to intrest only and still had some negitive gearing, you would be entitled to the full amount of the co- contribution payment so you could build up a bank of super. and thus depending on your option, shares. The one catch is you need to put in $1000 dollars after tax cash, $20 a week doesn't sound a lot but I know it could be hard. Any deal that gives you 150% for your money is something worth considering.
One thing I should add, I am not a tax person or anything I'm just letting you know what I'm playing with for you to consider and what you loose one way you may be able to pick up another.
Have fun with it.