Should I sell ?

[SmiTTy2008]

I know this particular part of the forum is "Where to buy" , nonetheless I hope the question still somewhat fits into this category.

I currently have an IP (unit) in homebush NSW (not homebush bay, rather the other side of the station close to flemington station). I have a decent amount of equity in it and actually not far from paying it off. I also have a PPOR under my name.

I bought the IP when it was brand new, if I sell it now - its market value would be a little under the original purchase price. If I had the money again, I probably would not buy where I did. Now, i've learn quite a few lessons from this purchase, firstly I dont believe I did the research I should have and I realise now I did not structure my finances as well as I did (i.e. Having all this equity stuck in it while having a bigger PPOR debt).

My question is , I'd like to get peoples opinion on whether I should sell this property, pay off my PPOR and use the remaining money to leverage my next buy (hopefully somewhere in the lower north shore). Or should I hold on to it and enjoy the CF+ and cross my fingers that prices will go up (I probably havent held the property through a full cycle yet). I wouldnt be able to purchase another IP in the lower north shore in my current financial state because I have a PPOR and banks see that as a big drawback (i.e. not money making debt - I've verified this).

Now I know theres a big debate on buy and hold vs sell (which is not what Im asking) ... IMHO I don't believe the area was the best investment at the time so I am considering if I should cut my losses, start afresh and structure my finances much better.

Thanks for your input guys.

 

[DanielG]

I don't think anyone should listen to "never sell". Sell for the right reasons though. Im not sure why you want to sell, but if in todays economic climate with low interest rates and soaring rents you feel your investment is still a big drain on your cash flow, then perhaps you should.

I think you should see an accountant who could probably clear the numbers for you better.

 

[Rolf Latham]

Hiya


The future cap gain in real terms will probably be better in the future than what you have experienced.

Often when u buy new stock, the cap gain is a little less than established stock because of developer margins.

Depending on when you bought, the average gains in Sydney have been pretty thin on the ground as well.

Nonetheless, your finance structure is sucking tax dollars out of your pocket and maybe this part alone would make it worthwhile to either sell outright, or resell to a related entity ( such as a unit trust) to re gear the property.

Sit down with a good broker and an accountant and do the sums

ta
rolf

 

[SmiTTy2008]

Im not sure why you want to sell, but if in todays economic climate with low interest rates and soaring rents you feel your investment is still a big drain on your cash flow, then perhaps you should.

Well, my logic behind it is, Sell to buy in another location that, IMO, has better potential of capital gains, AND to restructure my finances more wisely.

And you're right - I should go see an accountant.

 

[kaiseriqbal]

Hi Smitty,

I think the Homebush to Granville area would be a decent place to buy at the moment. Its close to the city and for the past five or so years has had very little growth which means that for suburbs that close to the city it is quite cheap.

I was looking at a few properties in those areas since the cash flow is very good in suburbs such as auburn and even homebush west.

 

[twobobsworth]

Could you sell it to your partner/wife/significant other?

 

[travelbug]

When you sell then buy another unit that will incur many extra costs.
I'm assuming the loans are crossed collaterised. Also that you would be positive on the unit so getting income that you would also be taxed on.

I can't see why the banks won't lend you money if you have lots of equity, even if it's in the IP.

Maybe speak to a mortgage broker re finance (and then run it by your accountant). You may be able to refinance the whole lot. That may make it possible to also buy something else. Maybe not north shore (bit expensive) but a cheaper area.

good luck.

I'm just starting and I made mistakes with my finances too. You learn though. Keep going.

 

[BayView]

If it were me,

I would have paid out the PPoR debt before the IP debt, because the PPoR isn't tax deductible. However, the situation is that you now nearly own the IP. That is still good.

Unless you are experiencing some cashflow stress while holding this IP, I would keep it and use the rent to pay out the PPoR debt now. Just pay the minimum repayments on the IP from now on until this is accomplished.

The cap growth for the IP will happen; but as Rolf said; may take a bit more time due to the factors he mentioned.

 

[HandyAndy888]

I know this particular part of the forum is "Where to buy" , nonetheless I hope the question still somewhat fits into this category.

I currently have an IP (unit) in homebush NSW (not homebush bay, rather the other side of the station close to flemington station). I have a decent amount of equity in it and actually not far from paying it off. I also have a PPOR under my name.

I bought the IP when it was brand new, if I sell it now - its market value would be a little under the original purchase price. If I had the money again, I probably would not buy where I did. Now, i've learn quite a few lessons from this purchase, firstly I dont believe I did the research I should have and I realise now I did not structure my finances as well as I did (i.e. Having all this equity stuck in it while having a bigger PPOR debt).

My question is , I'd like to get peoples opinion on whether I should sell this property, pay off my PPOR and use the remaining money to leverage my next buy (hopefully somewhere in the lower north shore). Or should I hold on to it and enjoy the CF+ and cross my fingers that prices will go up (I probably havent held the property through a full cycle yet). I wouldnt be able to purchase another IP in the lower north shore in my current financial state because I have a PPOR and banks see that as a big drawback (i.e. not money making debt - I've verified this).

Now I know theres a big debate on buy and hold vs sell (which is not what Im asking) ... IMHO I don't believe the area was the best investment at the time so I am considering if I should cut my losses, start afresh and structure my finances much better.

Thanks for your input guys.

I think you have already talked yourself into a sale.

 

[toony]

If you have a significant PPOR debt, I would sell the IP, move the left over equity into the PPOR. Then go to the bank and see what you can borrow on another property. Borrow 105% of the property value (even if you need to cross collaterise) at interest only.

Extra money goes to paying out the PPOR debt.

Thats my strategy and its worked for me.

 

[SmiTTy2008]

Thanks for all your input guys - really appreciate it.

I know i've made some mistakes, but its all part of the process

What I will definitely do is go see an accountant and work out some options and see which way is best to go. Thanks again all.

 

[HappyCamper]

Hey Smitty,

If capital gains is your main priority, I'd recommend checking with council as to the future plans for new apartments in Homebush West as I think the area has been flooded with new apartments in the last few years. IMHO, capital gains in Homebush West haven't been great partly due to a higher concentration of migrants from a particular part of the world. A bit like Ashfield in a way. If you expect these two trends to continue into the future, there may be weaker capital gains for Homebush West compared to other areas.

garbage