To sell or not to sell...that is the question!

Good evening all

I am new to this site and am enjoying reading the plethora of info that is on here. I have been attending several different seminars over the last few months and am just in my initial phases of paving myself a new and prosperous path!

The first part in this process is to decide whether to sell my IP or not. I have sought advice from several different financial planners whom all have been on the fence about it.

I bought a 4 bed brick property at Caboolture for $355k at the end of 2007, it went up substantially the following year and has now plummeted to around $320k. It is heavily negatively geared at around a cost of $14k out of pocket per year.

I am just wondering what others out there would do if they were in the same boat - sell it now at a low price and wear the loss which will increase my mortgage on my PPOR, or hang in there hoping it turns around? Conservatively, it has already cost me about $150k.

Any advice/thoughts would be appreciated :)

Thanks
 
The $150k loss includes the $14k out of pocket cost each year due to neg gearing and the rest is in capital loss due to decrease in value.

It is on a large block and is a typical family home. Could use a facelift but not sure it would be worthwhile as properties are very cheap in the area...
 
A project started a year or so ago to start looking at building a satellite city near to the area to however, this is in its very early stages and is not due to be completed until 2031, and is of course subject to many requirements along the way. It has been identified by Council as a significant growth area in the long-term.

This is obviously a long way away.....at this rate any benefit of keeping the property won't be obtained for another 20 years!
 
This is obviously a long way away.....at this rate any benefit of keeping the property won't be obtained for another 20 years!
property is generally a buy and hold type of investment. Due diligence prior to purchase would have told you most of that information, before you bought the house.

you will always win holding property over the long term.
 
you will always win holding property over the long term.
Problem is 20 years plus is a large chunk of lifespan to wait to get your money back. In the meantime you could be getting much better returns elsewhere.
Waiting for that long term.... I'd call it a major loss rather than a win.
 
I vote you hold it for another 2-3 years. Properties up there seem to be getting back to the 2007 levels ..... There is talk by the so called property experts of a good couple of years of growth as SE Qld plays catchup to other major cities ...... If that is the case you'll kick yourself for missing out on some capital gains.

It's up to you ... can you afford to pay the holding costs over that time? .... The other option is as Marg said:
Here's how I would look at it.

In one hand I have $320K. In the other I have your IP.

Which hand would you choose?
Marg
Good luck with your decision

Mystery
 
I think that it is not advisable to sell in this market unless you :

1) can't afford to hold it any longer (cash flow shortage )
2) can sell and buy another IP which would give a much better return ( cash flow and cg). Not sell yo buy doodads/ holidays

Otherwise I'd rather just keep investing and the property should go back to pre GFC price in the next few years .
 
Are you sure it is costing you $14,ooo a year? Have you taken your tax refund into consideration - Our houses are about $100 a week cash flow negative, each, then we counter balance that against income taxes that we don't pay.
maybe the situation isn't as bad as it first seems.

What is the rent you receive?
 
Lots of good points being raised....all totally valid.

Mystery and Bez23 - Half of me has been thinking the same way. If I wait a few more years the loss may not be so great. Unfortunately this is what I have been thinking the last 2 years and at this point, has not worked. You would think hanging in there longer would have to see some growth.....surely!

The other half sits with the rest who think it might be best to bail now and find something better to invest in.

AAA - I am hoping to buy another IP, but this time I will do the complete opposite to what I was originally taught. Will definitely be going for a cash positive property next time around!!!

Angel - All of the depreciation benefit has been exhausted on this property so the tax advantage is now quite minimal. I also secretly wonder who my tax accountant is working for, me or the ATO! Think it might be time to also shop for a new one as I am sure we are missing out somewhere along the line!

Thanks all for your contributions. Guess it just really highlights how much of a gamble either decision is really!
 
....All of the depreciation benefit has been exhausted on this property so the tax advantage is now quite minimal. I also secretly wonder who my tax accountant is working for, me or the ATO! Think it might be time to also shop for a new one as I am sure we are missing out somewhere along the line!....
Just make sure it is a property orientated accountant.
:)
 
Top