The wife and I find ourselves in rather strange circumstances at the mo'....and thought I'd ask the forum what they would do in a similar position....IF they were able to share some of the background we've been through.
I'll set the background by saying that everything is going swimmingly well, and nothing is of an urgent or NEED to basis. There are only good or very good choices, I suppose a culmination of 15 years of investing and planning that is coming together nicely.
OK, the reason for our indecision at present is that we have been handed an open ended cheque book by a current tenant who wishes to purchase the property they occupy. No biggy you say, make a choice and move on. We find, due to the numbers involved, it's not that simple.
The open ended cheque book offer came about due to my legal arguing with my counterpart, the Chief Financial Officer of the tenant. He's new to the position and quickly come to the conclusion that his organisation is in an absolutely shocking position. When putting him back in his box over some insurance issues recently...(i.e. he must foot every bill I throw at him and then some, and do it immediately to my utmost satisfaction....love those words), he obtained some legal advice re: his position and realised that it couldn't be worse. A big jar of vaseline was all that was going to help him.
Anyway, to cut a long story short, he doesn't want to be subjected to the horrible pain and torture for the remaining 8.5 years left on the Lease....to which he is legally locked in for. His only option is to buy the place from us, and he knows that option is going to hurt just as bad, but I get the tingly feeling at the end of my radar that he'd rather pay thru the nose just the once, rather than draw it out.
The wife and I are gayly tossing Lotto figures around as to what the price should be...you know, strike that happy medium between plucking the maximum amount of feathers from the goose without incurring too many hisses. We are adamant that the tenant must, on top of the sales price, pay our CGT liability, so that isn't a concern for us. The sale price will probably end up being ~ 60% more than we paid for it.
We bought the place last Dec, so just starting to digest the acquisition, and I feel it's an absolute cracker about to go off CG wise. I have nothing to base this on other than my past experience and gut feel of the market and general situation the property finds itself in. The wife would like to take the money and run, for a number of reasons ;
1. It's well above her comfort level.
2. It's not close to us, and in fact we've never seen it or been there.
3. It is a significant cashflow drain on our finances at the mo'.
4. She didn't like or want to purchase it in the first place.
However, it'll be completely nuetral to hold in another 3 years time, and in 6 months time another one of our props will easily cover the cash shortfall.
If we do sell, the profit will be the equivalent of 12 years worth of me working, so there is a reasonable incentive to sell on that side. The only thing holding me back of course, is the potential of even larger capital gains over the coming 5 years, probably (and I'm plucking numbers here) 50 or 60 years worth of equivalent working.
I spent a good 4 months conducting the appropriate due diligence process prior to offering, and then a further 5 months getting the deal to settlement....so I've got alot of hours and alot of skin in the game. The last thing I wish to do is extract all of this cash and find myself having to go through the same wearing process to find a decent enough home for the funds extracted.
Now, a bit of history, we had this exact scenario about 3 years back with another of our rusty sheds. We had an offer not less than 4 months after we bought it, for about 20% more than we paid. It was tempting at the time, but we rejected it. I thought it might double in the next 5 years, but beyond all expectations it has since quadrupled in the past 3 years.....so, if this one does the same, and it has all the characteristics physically of the earlier one - except a better tenant profile...we'd be mad to sell.
.....so, is it a case of "a bird in the hand is worth two in the bush"....or should we trust that it will behave just as our previous one did ??
Your thoughts / comments would be appreciated.
P.S. I've dropped the "ling" for those who keep asking.
I'll set the background by saying that everything is going swimmingly well, and nothing is of an urgent or NEED to basis. There are only good or very good choices, I suppose a culmination of 15 years of investing and planning that is coming together nicely.
OK, the reason for our indecision at present is that we have been handed an open ended cheque book by a current tenant who wishes to purchase the property they occupy. No biggy you say, make a choice and move on. We find, due to the numbers involved, it's not that simple.
The open ended cheque book offer came about due to my legal arguing with my counterpart, the Chief Financial Officer of the tenant. He's new to the position and quickly come to the conclusion that his organisation is in an absolutely shocking position. When putting him back in his box over some insurance issues recently...(i.e. he must foot every bill I throw at him and then some, and do it immediately to my utmost satisfaction....love those words), he obtained some legal advice re: his position and realised that it couldn't be worse. A big jar of vaseline was all that was going to help him.
Anyway, to cut a long story short, he doesn't want to be subjected to the horrible pain and torture for the remaining 8.5 years left on the Lease....to which he is legally locked in for. His only option is to buy the place from us, and he knows that option is going to hurt just as bad, but I get the tingly feeling at the end of my radar that he'd rather pay thru the nose just the once, rather than draw it out.
The wife and I are gayly tossing Lotto figures around as to what the price should be...you know, strike that happy medium between plucking the maximum amount of feathers from the goose without incurring too many hisses. We are adamant that the tenant must, on top of the sales price, pay our CGT liability, so that isn't a concern for us. The sale price will probably end up being ~ 60% more than we paid for it.
We bought the place last Dec, so just starting to digest the acquisition, and I feel it's an absolute cracker about to go off CG wise. I have nothing to base this on other than my past experience and gut feel of the market and general situation the property finds itself in. The wife would like to take the money and run, for a number of reasons ;
1. It's well above her comfort level.
2. It's not close to us, and in fact we've never seen it or been there.
3. It is a significant cashflow drain on our finances at the mo'.
4. She didn't like or want to purchase it in the first place.
However, it'll be completely nuetral to hold in another 3 years time, and in 6 months time another one of our props will easily cover the cash shortfall.
If we do sell, the profit will be the equivalent of 12 years worth of me working, so there is a reasonable incentive to sell on that side. The only thing holding me back of course, is the potential of even larger capital gains over the coming 5 years, probably (and I'm plucking numbers here) 50 or 60 years worth of equivalent working.
I spent a good 4 months conducting the appropriate due diligence process prior to offering, and then a further 5 months getting the deal to settlement....so I've got alot of hours and alot of skin in the game. The last thing I wish to do is extract all of this cash and find myself having to go through the same wearing process to find a decent enough home for the funds extracted.
Now, a bit of history, we had this exact scenario about 3 years back with another of our rusty sheds. We had an offer not less than 4 months after we bought it, for about 20% more than we paid. It was tempting at the time, but we rejected it. I thought it might double in the next 5 years, but beyond all expectations it has since quadrupled in the past 3 years.....so, if this one does the same, and it has all the characteristics physically of the earlier one - except a better tenant profile...we'd be mad to sell.
.....so, is it a case of "a bird in the hand is worth two in the bush"....or should we trust that it will behave just as our previous one did ??
Your thoughts / comments would be appreciated.
P.S. I've dropped the "ling" for those who keep asking.
