To sell or not to sell that is the question

[Chugoa]

Hi,

A couple of years ago i made a very bad decision. We bought a property off the plan, as we knew the developer and thought we were onto a good thing !

When the building was finally finished the bank evaluated it less than the contract, and to save our deposit (and face) we borrowed against our home to complete the deal (in hind sight "the worst decision of our financial lives !").

We have subsequently re-financed and surprise surprise it was values at even less again !!

On the good side (If it can be found, I am a optimist...just) the property has always been with a tenant, and that side of things seems to be going well, but it is negatively geared and the depreciation has helped with tax etc.

Do I sell the thing and cut my losses ?
Since I've already lost do I keep it ?

I'd like to continue investing in property but this situation has got me completely stuck.

For a newbie where do the gurus go to get educated, with so many promises from educators that have made it like Dymphna Boholt and the like !

Any advice opinions will help...

Thanks for reading !!

 

[Tyla]

There are a lot of people with good knowledge in SS forum. if you dont mind sharing a bit more info like how much you have lost on paper, the area it's in, how much cashflow negative it's, etc, they might be able to give you more specific advice.

You've already lost money. Don't just assume that spending more money in "property courses" will help you make money. Try learning from this forum and experienced members as much as you can, ask questions. That will be the best education you can get and it's free too.

 

[MickStephens]

My instinctive advice is to ride the storm, if you can service the loan, and wait for the market to catch up.

I am by no means an expect, so this shouldn't be taken as gospel.

 

[XMW]

Bank valuation does not equal to current market value. I'm sure current market value should > than purchase price, given market performed so well recently.

 

[Brady]

Bank valuation does not equal to current market value. I'm sure current market value should > than purchase price, given market performed so well recently.

This is a terrible comment.

Bank valuations prime source to determine value is comparable sales, yes in a very hot market can take some catch up waiting for settlements... but doesn't sound like it's the case as OP has had two valuations on the decrease. And to say you're sure that market value is more then purchase price? This confuses me, in most cases purchase price = market value. If market value was more you would be paying more.

As for market performed so well, which market are you referring to? OP hasn't stated where there property is... except that it's an OTP. Which wouldn't surprise me, there is probably other people thinking the same thing and have already cut their losses and sold, thats likely were the valuation came from.


Chugoa, great news that the property has been tenanted that a plus. Has the rent been increasing? What are similar properties selling for? Are there alot of similar properties for sale, would it take long to sell your property? If you sold would you then look to purchase elsewhere?

 

[Big Will]

Without know all the details on the exact situation.

My parents bought a house for like $150,000 20 years ago. 7 years after they bought it, it was still worth $150,000 and everyone was saying sell it is a lemon. Anyway they didn't (incase you haven't read) and in the next 3 years it nearly doubled ($280,000 estimate). Now 10 years on they estimate it is worth about $500-550k.

There is a lot of fees involved in buy and selling (about $50k changeover) and the saying I always go with is it isn't timing of the market but time in the market.

 

[Chris B]

Hi,

A couple of years ago i made a very bad decision. We bought a property off the plan, as we knew the developer and thought we were onto a good thing !

When the building was finally finished the bank evaluated it less than the contract, and to save our deposit (and face) we borrowed against our home to complete the deal (in hind sight "the worst decision of our financial lives !").

We have subsequently re-financed and surprise surprise it was values at even less again !!

On the good side (If it can be found, I am a optimist...just) the property has always been with a tenant, and that side of things seems to be going well, but it is negatively geared and the depreciation has helped with tax etc.

Do I sell the thing and cut my losses ?
Since I've already lost do I keep it ?

I'd like to continue investing in property but this situation has got me completely stuck.

For a newbie where do the gurus go to get educated, with so many promises from educators that have made it like Dymphna Boholt and the like !

Any advice opinions will help...

Thanks for reading !!

Coming to SS is a good start towards learning about property investment. I can't think of a better resource that gives you access to so many intelligent, experienced and helpful people. Of course it requires some effort from you if you want to get the most benefit. If you're looking for a quick and easy way to make money, you can become easy prey for property spruikers and the like.

If someone is giving advice, you should ask yourself lots of questions like "What's in it for them?", "Are they qualified/experienced in this area?", "Does it sound too good to be true?" and "What independent evidence is there to confirm what they're telling you?"

No one wants to lose money when investing but it has happened at some point to most people. The important thing is to learn from your mistakes.

All investment has an element of risk and you need to understand the risks and potential benefits and assess whether it aligns to your investment strategy and attitude to risk.

Before deciding whether to sell, you need to try to find out if you have a dud investment that is likely to continue to under-perform or if it might make a good investment at the current valuation. Valuers tend to be conservative, so it is possible you would get a higher price than what they have assessed.

Where is the property located? How big is the development? Are there other properties in the building for sale at the moment or recent sales to compare?

 

[Ausprop]

aside from equity considerations it's rarely worth selling but we need to know more details

 

[Jaggannath]

Unless it's preventing you using the money better (which it doesn't sound like you have a plan), hold it. You only crystallise a loss when you sell, and the fees associated will hurt unless you have a plan.

We'd need to know where the property is, but if you feel it has good fundamentals, and it's always tenanted, I'd suggest keeping it.