What would you do?

[stevie_sloth]

Just curious to see what people would do in this particular situation...

You own a fairly standard but quite nice 2 bedroom, 2 bathroom, 2 balcony apartment on the Gold Coast, about 10 minutes from the beach (walking distance).

You paid $343,000 in May 2008 (this includes stamp duty and all legal fees applicable. The actual purchase price was $337,000).

You have paid off $50,000 from the initial loan, now owing $293,000. (the loan is not through a bank / lender, but through a family member and the majority of it pays no interest)

You have owned the property for almost 4 years. You want to move out and buy another property, but times are tough for sellers.

You have had 4 valuations from real estate agents over the past 18 months that gave a value of between $340,000 - $370,000 for the property. None of these really match up with recent sales of similar properties in the area. The sales of similar properties are between $300,000 - $340,000.

You and your partner's combined weekly (after tax) income is about $1,000.

Do you...

- Sell and buy elsewhere immediately (try to have the purchase and sale occur simultaneously as much as possible)

- Sell and rent for a while

- Move out and rent elsewhere and retain the property to try and get some more capital growth and rental income (assuming the new rent would be less than the rent you could achieve for your original property)

- Move out and buy elsewhere whilst retaining the original property for rental income and capital growth

Clearly that ^ option is best, but with the financials the way they are and the low weekly income, it is probably not a viable option.

I know (and several others around here also know) what I personally want to do, but I was just interested to see what you would do in this situation in terms of the financial aspect.

 

[Propertunity]

(E) None of the above

You have a 0% interest loan. If this were to become an IP, then virtually all the rent would become taxable income (as you have no expenses other than strata & on paper loss of depreciation).

Stay there and buy an IP somewhere else.

Otherwise sell and buy again in the same market.

 

[srini]

Agree partially with Propertunity.

I'd stay there and pay down loan asap and keep the family member happy (See http://www.somersoft.com/forums/showthread.php?t=76137).

I'd save a decent sum and offer to pay the family member. Or save a decent deposit and then look for an IP.

$1000 pw is a good sum of money, but without knowing your circumstances (kids, other loans etc.) it doesn't leave a lot of money for investment.

How much would the current PPoR rent for realistically? This would also help decide next steps.

Thanks
Srini

 

[amiaow]

Why do you want to move so badly? It seems like a crazy thing to do if you're going to make a loss.

Also agree with paying down the family loan first- that should definitely be a priority, regardless of what the person who lent you the money says. If you paid 343k and you have paid off 50k between May 2008 and January 2012, that is only $1130/month (assuming 50k & 44 months) that you're paying off. You'd be paying well over that if you were paying a mortgage back to a bank (and realistically, even if you were renting). Why not pay down that loan at the rate that you'd actually pay if you had a bank mortgage?

 

[stevie_sloth]

We have wanted to move since we moved in! We just aren't happy and have never been. We bought entirely with our heads and ignored our hearts, and we have paid a high price in terms of our emotional happiness.

Anyway...our income is pretty much taken up with bills.

I was just curious to see what others would do in this circumstance. All we really want to do is move, in whatever way we can.

 

[Graingrower]

Anyway...our income is pretty much taken up with bills.

Thats funny!

 

[sanj]

We have wanted to move since we moved in! We just aren't happy and have never been. We bought entirely with our heads and ignored our hearts, and we have paid a high price in terms of our emotional happiness.

Anyway...our income is pretty much taken up with bills.

I was just curious to see what others would do in this circumstance. All we really want to do is move, in whatever way we can.

you keep saying that but youve said this for well over a year and done nothing about it.

there are plenty of options available to you but your problem is youre passive to everything

- find it hard to get around - but dont get a car or at the very least a licence and rent a car when needed
- income not enough - dont choose to work more or get higher paying jobs
- not enough savings etc - dont want to sell some of your equiptment you have that is worth 5 figures, also see above post re higher income
- dont have a say in the strata issues - choose not to go to strata meetings (yes not being able to get there by bus still means youre choosing to not find a way to get there)
- wnating to buy a new place but not wanting to sell your place first despite being told multiple times over the last year that is prob what you need to do
- wanting to sell the place but not wanting to make it look right by movign stuff into storage or setting up second bedroom etc
- being extremely unhappy with your current place but still being there 18 months later and always looking for dream houses outside your budget



this is just the stuff i can remember off the top of my head. you are LUCKY here. you have a loan that you are paying off at a rate of under 3% p.a under extremely flexible terms and youve got a 2 person household. the vast majority of people do not have that.



there are so many options in front of you to tackle the issues youve got but you choose to do nothing. getting advice is all well and good but ultimately pointless if no action is taken


by the way if i have misread anything or misinterpreted i apologise in advance.

 

[wylie]

I actually think there is a lot of truth in sanj's post. I'm sure that is what many of us who gave advice in the past is thinking, and I'm sorry to sound like your mother, but I have children who do the same... complain about wanting something to be different, but just will do nothing to facilitate the change.

I'm guilty of it too in some ways, so I'm not bagging you out. Until you want something really, really badly enough, perhaps you will just be treading water.

You might also look back and think you did the right thing in not moving now. Who knows what is around the corner. But if prices rise, you will be paying more for whatever you want to move to. It just seems a shame not to make your place "sellable", sit with cash and pounce on something you love. Short term pain is that you may have to rent, but you may snaffle a bargain because you can move quickly and have cash.

But the mother in me wishes you the best in whatever you do, whether that is to accept that you are not ready to make the big changes necessary to find somewhere that you can be happier, or to accept things and try to feel happier about your decision to stay. I would say (again ) that you need to do something to make things change. It is not going to just "happen".

 

[Bird Dog]

I think your desperation is clouding your rational judgement Stevie..(if I'm being really honest).

It seems like you keep asking the same question of people but expecting a different answer to confirm your emotional preference. Whatever decision you make (that suits your emotional choice) it's going to cost you!

I'm not going to bother re-reading all your other post (re your circumstances) but I can tell offer the following free advice..
Yes, you've found your "perfect" house and you have an idea of what it should be worth but what you're not considering is the price of your "perfect" house is relative to your own (as they both fall into the same Gold Coast market).
Evidently when the value of your home rises, so will your "perfect" home (in relative proportion of course) so you will always be taking a jump in how much you have to borrow.
You're also going to lose quite a considerable amount in agents fees, stamp duty etc by changing and you've also already admitted that all your current income (of $1,000 p/w) is taken up by bills.. So how do you expect to afford the additional serviceability for the new place?

The best thing you can do is to stay put, keep paying down your low Interest loan (god bless your mother btw and I hope she gets her boxes of roses on mothers day) until you have enough equity in your current PPOR at which time sell and move into the next "perfect" place that comes onto the market. And believe me, despite what you think now, another will eventually become available either in the same block, next door or in the next street soon enough.

So when can you make the move...???
You need to work out the following:
* What is my current serviceability on my current PPOR.
* How much will stamp duty, moving ($2,000 I recall you mentioned) agents fees and all the other hidden fee's we forget about come to?
* What will my ideal new property cost (as a % of my current situation, not $$$ as that way you will have a scalable formula that will move with CG).
* How might my income grow per year.
* How quickly can we pay down the low interest debt we have to dear old Mum?

This should then give you at least a time-line you can work towards and may assist you're discomfort with your current residence since you have something to aim for.
Believe it or not, you're on a fantastic wicket with your home loan and this is probably were you are going to make your quickest gains in getting out of your current PPOR so focus on this and the rest will fall into place.

All the best

B.D

 

[AAA]

Hi SS,

Given that you guys are unhappy at the place and have a low interest mortgage, I would buy another property and keep the existing apt.
This would
1) Give you the happiness of staying in the place you want
2) Great opportunity to negotiate hard and buy a place for under market value (instant equity!)
3) Save you from losing money on the existing apt
4) Increase your chances of making money in the future!

All the best!
AAA

 

[srini]

I think your desperation is clouding your rational judgement Stevie..(if I'm being really honest).

It seems like you keep asking the same question of people but expecting a different answer to confirm your emotional preference. Whatever decision you make (that suits your emotional choice) it's going to cost you!

I'm not going to bother re-reading all your other post (re your circumstances) but I can tell offer the following free advice..
Yes, you've found your "perfect" house and you have an idea of what it should be worth but what you're not considering is the price of your "perfect" house is relative to your own (as they both fall into the same Gold Coast market).
Evidently when the value of your home rises, so will your "perfect" home (in relative proportion of course) so you will always be taking a jump in how much you have to borrow.
You're also going to lose quite a considerable amount in agents fees, stamp duty etc by changing and you've also already admitted that all your current income (of $1,000 p/w) is taken up by bills.. So how do you expect to afford the additional serviceability for the new place?

The best thing you can do is to stay put, keep paying down your low Interest loan (god bless your mother btw and I hope she gets her boxes of roses on mothers day) until you have enough equity in your current PPOR at which time sell and move into the next "perfect" place that comes onto the market. And believe me, despite what you think now, another will eventually become available either in the same block, next door or in the next street soon enough.

So when can you make the move...???
You need to work out the following:
* What is my current serviceability on my current PPOR.
* How much will stamp duty, moving ($2,000 I recall you mentioned) agents fees and all the other hidden fee's we forget about come to?
* What will my ideal new property cost (as a % of my current situation, not $$$ as that way you will have a scalable formula that will move with CG).
* How might my income grow per year.
* How quickly can we pay down the low interest debt we have to dear old Mum?

This should then give you at least a time-line you can work towards and may assist you're discomfort with your current residence since you have something to aim for.
Believe it or not, you're on a fantastic wicket with your home loan and this is probably were you are going to make your quickest gains in getting out of your current PPOR so focus on this and the rest will fall into place.

All the best

B.D

Absolutely on the money I think.

At the risk of sounding like a ****head, I think the emotional reaction *is* clouding your rational thinking.

The logical thing to do would be to write down all the things that you think are wrong with your current place and why you would want to move.

And then also write down all the options you can think of.

Because you have borrowed at 0% interest, if you move and refinance with a bank, it'll hurt your cashflow, not to mention the added rent/mortgage for your new place.

I would start with your budget and see where the money is coming from and where it goes. And then do an objective what-if analysis based on the options you have come up with.

We were in a similar situation and were building a new bigger house while living in our townhouse.

We have now rented out our townhouse and have completed building our new place. But, in the interim, we had to move with mum-in-law *gasp* for a few months.

I don't think there are any easy ways. Just delayed gratification.

 

[VYBerlinaV8]

All we really want to do is move, in whatever way we can.

Why do you want to move? What's the problem? Location? Neighbours? Layout?