Should we just sell?

Hello,

As some may know, we own 1 IP which is a 4 bedroom house in Ashmont (Wagga Wagga), NSW. It is CF neutral.

We've had this house for about 2 years but I'm not sure if we should just sell it as maybe it wasn't as good of an investment as we initially thought. Tenants have been a nightmare which I sort of expected, being a low-income area and all but I thought we would at least have one who managed to get to the end of the lease without arrears.

Our current one hasn't paid rent since the start of December. At the beginning, they requested repairs and we promptly organised these. They still didn't pay. We went to the tribunal to get them evicted, our hearing got pushed back a few weeks and then they were awarded an extra month to get the rent sorted. Their lease is about to end and they will be evicted next week. We've had to cover all the outgoings with no rental income for 6 months.

Coincidentally, my husband has had a reduction in work hours which has meant even less income coming in. We're a few weeks behind with the IP mortgage, the rates need to be paid, the building insurance is due tomorrow and we have a bill to pay for the repairs too. I was just going to wait for them to be evicted so we can get the insurance payment to cover the arrears and expenses but I'm wondering if it's worth hanging on to this property at all? The potential for CG seems slim but it is cashflow neutral when someone is actually paying the rent.

What would you do?
 
Sorry to here about your trouble,if there was a possibility in getting tenants that at least paid their rent I would maybe hang on but seeing that in this area their is no chance of this and all the trouble you have been having not to mention your partners income I would sell it but trying to find a buyer will probably take time.
Good luck I hope it works out for you.
Macca446
 
IMO these tenants should be evicted ASAP

Gee that's nice of the tribunal to give them an extra month when they have paid zip since December.

If you don't feel confident with any other tenant then it might be best to sell it.
 
Definitely sounds like it might be worth cutting your losses.

Couple weeks behind in your IP mortgage, I thought you were just booking an overseas trip just the other week?
 
I replied in the other thread as well. It was booked at the start of the year and I thought tenants would be well and truly gone by now. Flights were booked with points and only 2 weeks of cheap hotels were paid for (just after flights were booked).
 
I'm surprised so many are saying to quit it! When the tenants are paying its CF neutral which sounds good. Sometimes we have bumps in the road and five or six months of no rent is certainly a bump in the road. I would suggest there are valuable lessons to be learnt from these tough times and once you get these freeloaders out and decent tenants in, things will start looking up!
Good luck,
Cheers
 
That's bad luck. When the budget comes into effect. Those in low socio will be worse.

Just wondering if you are self managing because it's the PMs job to screen and handle this. My PM goes to tribunal after 2 weeks haha
 
Cimbom, my frank opinion is that you should sell off a cashflow neutral property with all its attendant problem tenants and buy a property that is cashflow positive in an area where you can get great tenants and where there is prospect for good capital growth.

It is too hard to be in an area where you keep getting bad tenants and have to forgo months of rental income. If you forsee that your next lot of tenants will be problem-free and there is capital growth in the medium term for Ashmont, then I say hold onto your investment. But if you think there will be minimum capital growth in the medium term and forsee getting problem tenants one after another, then it's just not worth holding onto to the Ashmont IP.

My 2 cents worth.
 
I was just going to wait for them to be evicted so we can get the insurance payment to cover the arrears and expenses but I'm wondering if it's worth hanging on to this property at all? The potential for CG seems slim but it is cashflow neutral when someone is actually paying the rent.

What would you do?
Who is your insurance with? Most will only pay 6 weeks rent, not 6+ months.
 
Thanks for all your replies.

Who is your insurance with? Most will only pay 6 weeks rent, not 6+ months.
Yep, I'm a bit unsure about this. We're with Terri Scheer and they claim they pay 15 weeks if tenant is evicted by the tribunal but unsure if that applies to us because we went to the tribunal and were told to give the tenants an extra month first. We didn't go back again as the lease would have ended soon after this period anyway. I guess we'll get some of it back on our tax returns. Our mortgage should be up to date (or pretty close) by the end of next week.

Beanie Girl, unfortunately, we won't be in a position to buy another IP for a few years - certainly not anything in a significantly better area anyway.

I'll think about it a bit more before deciding I think.
 
You mention that the lease is about to finish (next week - so I assume 19 May 14 or so) but you want to turf them out??? Why not just wait until the lease finishes and give them their marching orders. I assume you will also be renewing your insurance until all this is finished and the house sold in case the tenants 'leave their mark' upon leaving (Since it doesn't sound the most amicable separation process). As noted, while the insurance may not pay out for the whole period that they have been in arrears, it will pay out some, and if they damage the place upon leaving then the insurance could also cover that as well.

It sounds as though you are fairly convinced to sell so it would be best to get them out, clean the place and investigate the best way to sell. The other option is to take a deep breath, assess where you are at (you say that it is CF neutral so should be costing you little to hold) and relook at your rent options. It sounds as though you may need to change REA (before choosing my best PM, I interviewed 6 REA. My worst REA was 'referred' to me and I didn't bother to interview them) and be quite involved in the screening process (remember you can get some terror tenants in places that cost $2000 a week and some great tenants in places that cost $300 a week - our tenants in the good ol' Macquarie Fields are great).

What would you expect to come away with if you sold now after holding for 2 years and CGT, costs etc etc? Of course if your own financial position is not as good as you would like, it is possibly best to sell to clear debts so you can concentrate on yourself now, then jump back in with some hindsight.
 
Thanks for all your replies.



Yep, I'm a bit unsure about this. We're with Terri Scheer and they claim they pay 15 weeks if tenant is evicted by the tribunal but unsure if that applies to us because we went to the tribunal and were told to give the tenants an extra month first. We didn't go back again as the lease would have ended soon after this period anyway. I guess we'll get some of it back on our tax returns. Our mortgage should be up to date (or pretty close) by the end of next week.

Beanie Girl, unfortunately, we won't be in a position to buy another IP for a few years - certainly not anything in a significantly better area anyway.

I'll think about it a bit more before deciding I think.
I think you'd even struggle to get 15 weeks rent... I think they will make you bear some of the responsibility for not kicking the tenant out at the first available opportunity. 6 months (and counting) is a staggeringly long time to let someone live in your property rent free...

You've got to get onto these people quickly and don't let up. If they know they're not going to be hassled for the rent then they'll take advantage of you - as you've found out. Issue the notice straight away and kick them out at your first chance.
 
Thanks for all your replies.

Beanie Girl, unfortunately, we won't be in a position to buy another IP for a few years - certainly not anything in a significantly better area anyway.

I'll think about it a bit more before deciding I think.
Is Mount Austin or Kooringal better suburbs to get decent tenants, you reckon?
Or is it much of the muchness in term of tenant calibre?
I am more familiar with the Logan suburbs in Brisbane.
Don't mind me asking, cimbom, how much did you pay for the Ashmont 4 bedder and how much are you getting in terms of rent for it?
I'm trying to see if I can suggest a Logan suburb in Brisbane of comparative value but better capital growth, better calibre of tenant and prospects.
 
From my (little) knowledge, Ashmont where the IP in question is located is slightly worse than either of those 2 Beanie Girl. From my understanding, Kooringal is slightly better than Mount Austin but there isn't a huge difference in it.
 
From my (little) knowledge, Ashmont where the IP in question is located is slightly worse than either of those 2 Beanie Girl. From my understanding, Kooringal is slightly better than Mount Austin but there isn't a huge difference in it.
They don't call it Trashmont for no reason. I wouldn't invest there, and that's coming from someone who likes slumdiving. :)
 
Chris pretty much explained it. We paid 150k and were getting $230/week with the current tenant but have got up to $250 depending on time of year, market, etc.
 
If you can get to a neutral position, and if you sell it you won't be able to buy another IP for some time, I would hold it in the hope of benefitting from future capital gain. If it was negatively geared, I would consider selling and cut my losses, but neutrally geared and well insured plus good tenant selection would be the way I would be heading.
 
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