Not a question really, more of a story that some might find interesting and perhaps a little amusing. 12 months ago hubby & I settled on a 3x1 IP in Mandurah for $200K. We borrowed 100% plus costs making our total loan $212K. After a 3.5 mth settlement period in a booming market, the property was worth about $230K the day we settled much to our surprise. Well the market kept booming and it became apparent that we had bought very well. 6 weeks ago the bank valued the property at $350K, meaning we were sitting on around $138K CG in under 12 mths.
Now it had always been our plan to ride the boom with this property and sell to realise the CG 12-18mths down the track - spend a bit on lifestyle options and pay down the mortgage on our PPOR, then replace this IP by buying straight back into the market. Incidently, we also have another IP in Mandurah doing well but having bought later in the boom, the CG hasn't been as good (but we're still smiling). This one was/is to be a long term hold strategy so we were keeping a foot in the market. (Because I know some of you will want to know 6 mths ago we paid $335K + $23K costs = $358K. Bank recently valued at $380K but realistic market appraisal is $400K. It is a 4 yr old 4x2 in a good area close to schools, uni/tafe, shops, public transport etc).
Now back to IP#1...1 yr down the track we asked the tennant to vacate with a veiw to doing a quick cosmetic makeover to maximise our selling price then sell. This coincides with what appears to us to be a slight cooling in the market. Has the boom ended or not? We just don't know but with Mandurah's population expected to double over the next 10-15 years we still expect to see at least the historical average growth rate of 7-8% in the longer term - certainly no bust or fall in prices. Anyway, we go to look the property over and think to ourselves this really is a good property - solid, attractive (albiet rundown but nothing our quick reno won't fix), roomy, excellent location and generally has a good feel about it. Let's keep it after all! But we've just turfed a reliable tennant out. Hmmm a bit dumb perhaps but hey whoever said we can't change our mind?
Soooo...the new plan is to still do the cosmetic reno since the house is now empty and if we do decide to sell later the work will have been done so we'll have the option to sell with the tennant in place. With fresh paint, carpet and a new solar hot water system (the old one still works but I don't know how as it is a rusted out eyesore located in full view at the front of the house). Total budget $4.5K. PM has advised rent would be $200 per week once the work is done, up from $165, and with rents on the rise we may be able to review in 6 mths. This has convinced us even more not sell. If we sold to realise the CG, then bought back into the market as per our original plan we'd have to spend at least what we sold this property for (ie $355-370K + costs = approx. $390K for a measly rental return of $200 p/wk).
Thanks to the boom, with our PPOR and two IP's we are currently sitting on about $320K equity per recent bank vals which is conservative. Both our incomes are on the rise thanks to the labour shortage over here in WA so we are sitting pretty to buy another IP somewhere. However, with future property growth a bit uncertain we're not so keen to borrow 100% + costs and possibly have to carry negative equity for awhile (we prefer to maximise our tax deductability and keep any cash in our own mortgage offset account). To combat this we'll be taking our time and looking for something with easy value add potential. But for the next few weeks we'll be spending all of our spare time renovating IP#1 - I can't wait to see the transformation.
Comments and opinions welcome.
Flatout
Now it had always been our plan to ride the boom with this property and sell to realise the CG 12-18mths down the track - spend a bit on lifestyle options and pay down the mortgage on our PPOR, then replace this IP by buying straight back into the market. Incidently, we also have another IP in Mandurah doing well but having bought later in the boom, the CG hasn't been as good (but we're still smiling). This one was/is to be a long term hold strategy so we were keeping a foot in the market. (Because I know some of you will want to know 6 mths ago we paid $335K + $23K costs = $358K. Bank recently valued at $380K but realistic market appraisal is $400K. It is a 4 yr old 4x2 in a good area close to schools, uni/tafe, shops, public transport etc).
Now back to IP#1...1 yr down the track we asked the tennant to vacate with a veiw to doing a quick cosmetic makeover to maximise our selling price then sell. This coincides with what appears to us to be a slight cooling in the market. Has the boom ended or not? We just don't know but with Mandurah's population expected to double over the next 10-15 years we still expect to see at least the historical average growth rate of 7-8% in the longer term - certainly no bust or fall in prices. Anyway, we go to look the property over and think to ourselves this really is a good property - solid, attractive (albiet rundown but nothing our quick reno won't fix), roomy, excellent location and generally has a good feel about it. Let's keep it after all! But we've just turfed a reliable tennant out. Hmmm a bit dumb perhaps but hey whoever said we can't change our mind?
Soooo...the new plan is to still do the cosmetic reno since the house is now empty and if we do decide to sell later the work will have been done so we'll have the option to sell with the tennant in place. With fresh paint, carpet and a new solar hot water system (the old one still works but I don't know how as it is a rusted out eyesore located in full view at the front of the house). Total budget $4.5K. PM has advised rent would be $200 per week once the work is done, up from $165, and with rents on the rise we may be able to review in 6 mths. This has convinced us even more not sell. If we sold to realise the CG, then bought back into the market as per our original plan we'd have to spend at least what we sold this property for (ie $355-370K + costs = approx. $390K for a measly rental return of $200 p/wk).
Thanks to the boom, with our PPOR and two IP's we are currently sitting on about $320K equity per recent bank vals which is conservative. Both our incomes are on the rise thanks to the labour shortage over here in WA so we are sitting pretty to buy another IP somewhere. However, with future property growth a bit uncertain we're not so keen to borrow 100% + costs and possibly have to carry negative equity for awhile (we prefer to maximise our tax deductability and keep any cash in our own mortgage offset account). To combat this we'll be taking our time and looking for something with easy value add potential. But for the next few weeks we'll be spending all of our spare time renovating IP#1 - I can't wait to see the transformation.
Comments and opinions welcome.
Flatout
