To sell or to rent out?

[Azza]

Hi,
I am new to this forum and need your advice

I live in Melbourne and own a 4br house in Greensborough. We recently renovated it and it worth about 350-360K.
I have around 150K outstanding in mortgage.

I want to buy a house in another area, for some 410-430K. I have a choice to sell house in Greensborough or to rent it out.
If I sell, it's all nice and easy - I got somewhere around 190-200K toward the new home.

If I rent it out, here is my plan:
I refinance Greensborough house to 95% of the current value. I will take interest-only investment loan.
The money I raise will be used towards the new house.

I'm trying to calculate how much I will be adding every year in my hope of future appreciation...

Now, the best I will be able to get from rent is about 300pw, maybe 320 if I very lucky. Minus 7% agents commission....
Council rates are about $780 a year
Landlords insurance $300 a year
Maintenance - who knows? Let's say 300-500 a year.
Tax return adds $80 to my accountant fees.
I should also assume about 3 weeks a year looking for tenants..

Do you think my calculations are roughly correct? Any other major expenses (apart from bank interest ) I forgotten?

Second question: do you think it's all worth the trouble? From one hand I already own the property, no need to pay stamp duty etc. On the other hand, it's freshly renovated family house right now, but it will turn into "first home buyers or investors" house in couple of years....

What do you think?

 

[chrispy]

Azza

I also live in the area. I believe it is about to take off, we have the freeway, shopping centres, good schools, not far to the city. If you look at other areas 20kms from the city and compare them to the North East, we have a long way to go as far as price increases.

If you want to build wealth through property you have the option to use the equity in your current home and purchase the next one.

Who knows what will happen with property, none of us have the ability to look into the future, we can only look at history and hope it will repeat.

Good luck with whatever you decide

Chris