What should I do.. Own or Rent

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From: Giovanni T


I need some advice from those who have gone before me...

My wife and I owe $167k on our house. The agent says its worth $240k - $260k (which I know they do to get business). We also have $25k of other loans. The best we have been offered for our home is $220k. Which would more than cover everything and give us money to invest.

The house is built from New, 10 - 15 mins from Adelaide CBD and is better fitted and finished than those around.. ie. 9 foot ceilings, solid jarrah floor, stainless steel appliances in Kitchen, Ducted reverse cycle AC.

We have worked out that renting will free up a lot of cash flow for us if we were to sell.

Another thing we have to think about is that we haven't completed the fences or lawn as it is a brand new house only 7 months lived in. It will take another $5k to complete these and we would obviously need to recoup that. We think the house might get more or perhaps just sell quicker if we finished it.

I would love your thoughts...
Giovanni
 
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Reply: 1
From: Ian Findlay


Why don't you approach your bank, get them to revalue to $240-260k (if
possible). Use excess equity to pay of $25k of other loans which I'd suggest
you pay off before you think about investing. If there is any left use this
as deposit for IP even if it means 90 or 90% LVR and paying LMI.

It seems a bit of shame to sell such a lovely house you have. You also have
to weigh up the feeling of living in your own home. Different people put
different values on this from almost nothing (its an CGT exempt investment
only) to 100% (would never consider renting and demand the security and
peace of mind that owning your own lifestyle).

Just my 2c worth anyway,

Ian



> From: "Giovanni T" <[email protected]>
>
> I need some advice from those who have gone before me...
>
> My wife and I owe $167k on our house. The agent says its worth $240k -
$260k (which I know they do to get business). We also have $25k of other
loans. The best we have been offered for our home is $220k. Which would more
than cover everything and give us money to invest.
>
> The house is built from New, 10 - 15 mins from Adelaide CBD and is better
fitted and finished than those around.. ie. 9 foot ceilings, solid jarrah
floor, stainless steel appliances in Kitchen, Ducted reverse cycle AC.
>
> We have worked out that renting will free up a lot of cash flow for us if
we were to sell.
>
> Another thing we have to think about is that we haven't completed the
fences or lawn as it is a brand new house only 7 months lived in. It will
take another $5k to complete these and we would obviously need to recoup
that. We think the house might get more or perhaps just sell quicker if we
finished it.
>
> I would love your thoughts...
> Giovanni
>
>
>
> To reply: mailto:p[email protected]
> To start a new topic: mailto:p[email protected]
> To login: http://bne003w.webcentral.com.au:80/~wb013
>
 
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Reply: 2
From: Paul Zagoridis


Ciao Giovanni

It's not clear from you post if you actually have your house on the market (you did get an offer for 220K).

It sounds to me like you have "the best house on the street". That normally means it's value is dragged down by perceived local values. That's a hard place to invest in, especially if the surrounding houses are also new.

YOu should ask yourself what you want to get out of the house you currently own. Ian's approach is quite sound it you like owning your own house.

Nella and I have just sold our apartment in Darlinghurst because we did not expect it to match the market over the next few years. Our investments on the other other hand do generally out-perform the market. So we've decided to rent and put the extra dollars saved in to investments.

This is a tough decision. Most people are not capable of the discipline required. We are deliberately renting cheaper to free up more cashflow. Our dream home can wait 10 years.

I would only sell if I thought I could do better with the money elsewhere. Otherwise consider refinancing. In this market banks are generally quite generous so why not take 90% of their top-end valuation and invest? Watch your cashflow closely in that case.

Paul Zag
Dreamspinner
Oz Film Biz is at
http://www.healey.com.au/~paulz
 
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Reply: 2.1
From: Giovanni T


Yes Paul... we had it on the Market for about 2 months.

The agent thought we'd sell it in a couple of weeks. It is true about our house being pulled down by those around it. And there is always the desperate seller, in the area proving buyers "right" that my house isn't worth that much.

That is one of the reasons why we thought about finishing the fence and lawn which still need completing.

I hope that clears it up for you

Giovanni
 
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Reply: 2.1.1
From: Andrew _


Giovanni,

Have you thought about renting your house out instead of selling it?

What rent would you get for it - would it cover the mortgage and your other loan?

Andrew
 
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Reply: 2.1.1.1
From: Giovanni T


Andrew...

We might get up to $250 per week for our house. Which would be just a little less than current repayments on our house only.

Regards
Giovanni
 
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Reply: 2.1.1.1.1
From: PT Bear


My wife and I currently rent and have been able to get the rent on our IP to easily cover the repayments. At the same time we're living closer to work in a larger apartment than our townhouse.

We bought in an area which is heavily owner-occupied and are renting where there's an over supply of rental apartments.

This way our IP pays itself off, contributes to our rent and we're living in a place better suited to our circumstances.

PT_Bear
 
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Reply: 2.1.1.1.1.1
From: Mel G


I have some 2 cents worth as well which I know works for us but may not for others...

My partner and I sussed out how much it would cost us to rent versus how much it would cost us to buy in the same area. Basically, it worked out better for us to rent because we don't have to pay council rates, body corporate rates, repairs etc. And to invest in the same area, we would be able to claim back the council rates, body corporate rates, repairs etc. on an investment property.

I suggest you do the sums, like we did and take it from there. There are quite a number of tax benefits on an investment property. Where as you wear all the costs when you are an owner/buyer.
 
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