Why IP
- Thread starter HowDo
- Start date
HowDo,
The growth period may be over for now, but remember that property is a cyclic market and there will be further growth in a few years.
There are lots of stories on the forum about people who sold and now the property sold is worth much more than they received for it, so it's really up to whether you wish and can afford to hold onto the investment for future gains considering there may be limited gains in the short-term.
My take would be hold unless you have a better investment to put your funds into and even then consider refinancing rather than selling - remember there is a cost (CGT) if you sell that you do not bear if you simply refinance, so refinancing is an option for extracting cash for a better investment as well.
Cheers,
Aceyducey
The growth period may be over for now, but remember that property is a cyclic market and there will be further growth in a few years.
There are lots of stories on the forum about people who sold and now the property sold is worth much more than they received for it, so it's really up to whether you wish and can afford to hold onto the investment for future gains considering there may be limited gains in the short-term.
My take would be hold unless you have a better investment to put your funds into and even then consider refinancing rather than selling - remember there is a cost (CGT) if you sell that you do not bear if you simply refinance, so refinancing is an option for extracting cash for a better investment as well.
Cheers,
Aceyducey
HD,
Perhaps you need to think a little about what you want and where you want to go , and then maybe plan how you're going to get there.
Jan's story in her books, and I would think the aim of most forumites is loosely termed "financial freedom." If that's your goal, then 1 IP is just the very start, and you need to be thinking more of 10 plus IPs, and holding those IPs through two property cycles. That's the game!!
The profit you will make by selling now will be reduced by selling costs and CGT etc . Acey's advice on refinancing and getting that equity to work for you is "spot on".
Also, it's a brave punter who calls the top of any market. If the IP is in SE Qld , the predictions are for 20%plus growth for the next two to three years. And , in general , while interest rates remain low the game will go on.
LL
Perhaps you need to think a little about what you want and where you want to go , and then maybe plan how you're going to get there.
Jan's story in her books, and I would think the aim of most forumites is loosely termed "financial freedom." If that's your goal, then 1 IP is just the very start, and you need to be thinking more of 10 plus IPs, and holding those IPs through two property cycles. That's the game!!
The profit you will make by selling now will be reduced by selling costs and CGT etc . Acey's advice on refinancing and getting that equity to work for you is "spot on".
Also, it's a brave punter who calls the top of any market. If the IP is in SE Qld , the predictions are for 20%plus growth for the next two to three years. And , in general , while interest rates remain low the game will go on.
LL
Hi HowDo,
Reasons not to sell an IP ...
Don't pay CGT if you don't sell
Tax benefits
Potential to renovate and increase yield
Future growth
Good to borrow against
Reasons to sell an IP
No potential of growth
Bad/low yield, no way to increase yield
Rezoning and devaluation of land
Need the money for a better deal
Need the money
Reasons not to sell an IP ...
Don't pay CGT if you don't sell
Tax benefits
Potential to renovate and increase yield
Future growth
Good to borrow against
Reasons to sell an IP
No potential of growth
Bad/low yield, no way to increase yield
Rezoning and devaluation of land
Need the money for a better deal
Need the money
Hi all,
If you only have the one IP and there is no growth 'til the next cycle, there is no better way to save money than paying off your loan(hence the reason for keeping the IP.) As you pay down your loan(or use offset account) the money put in earns effectively the rate of interest you are paying, tax free. Therefore after a few years, even if the growth is no more than inflation you will have an investment that is positively geared that you have a lot of equity in.
To me this is better than having money in the bank that you pay tax on the paltry amount of interest you receive, plus the dollars would be devalued over time.
bye
If you only have the one IP and there is no growth 'til the next cycle, there is no better way to save money than paying off your loan(hence the reason for keeping the IP.) As you pay down your loan(or use offset account) the money put in earns effectively the rate of interest you are paying, tax free. Therefore after a few years, even if the growth is no more than inflation you will have an investment that is positively geared that you have a lot of equity in.
To me this is better than having money in the bank that you pay tax on the paltry amount of interest you receive, plus the dollars would be devalued over time.
bye
To Sell or Not to sell, that is the question !!
I've only been a IP owner for 8 months now, but I now have 3 rents coming in.
I have been a property owner since 1977 and have purchased 12 properties in my life, both in UK and Australia.
With the hindsight that I have now, and if I could change one thing in my past, it would be to NEVER have sold ANY of the properties.
At the time of selling the ones I did, I normally made a profit, but no where near the profit I could make if I still owned them.
I've only been a IP owner for 8 months now, but I now have 3 rents coming in.
I have been a property owner since 1977 and have purchased 12 properties in my life, both in UK and Australia.
With the hindsight that I have now, and if I could change one thing in my past, it would be to NEVER have sold ANY of the properties.
At the time of selling the ones I did, I normally made a profit, but no where near the profit I could make if I still owned them.
Or is it.....
Anyone got a story where they were better off selling their property rather than keeping it?
I haven't heard one yet, but I've heard lots of people talk about how much better off they would have been if they had not sold.
We almost sold one recently, but ended up keeping it - the house next door (a fairly direct comp) sold two months later for more than $40K more than the price we were prepared to sell at....
Cheers,
Aceyducey
I guess the real issue is "when should you sell?". Apart from scenarios where you know there's going to be a new highway/jail/noisy factory/abbatoir built next door (but everyone else don't
when should you sell.What are the reasons people have sold properties? I've been thinking about this a bit lately. If we assume that in the short-medium term property prices are somewhat volatile, is it possible to trade into and out of the market and make more than just holding the property?
I suppose the illiquid nature of property makes it difficult to do so. The stamp duty, CGT and selling costs will require some fairly spectacular rises and falls to make selling out and buying back in a worthwhile proposition...I guess shares are the medium for "traders"...
Thinking about this some more, maybe it is only where people have a cash shortfall that they sell. Could buying only CF +ve properties eliminate the need/desire to sell?
From strict investing "theory" I suppose one should only sell when there's an alternative investment available which will, over the investment timeframe will yield a better return than not realising the first investment.
Delving deeper, maybe the issue is that in an ideal world with an infinite investing timeline, one would never sell...but we're all here for our 3 score and 10-40... so at some time you gotta cash some of your investments in to have cash to whoop it up
before you cash in your chips... just some random ramblings...
N.
If they're selling for a reason such as a highway going through, toxic waste dump being built down the road or whatever - would you want to be buying
Most people sell because they need the money to buy their next house (and were not educated about saving or property investing), because they were not taught that it is OK to own more than one property, because they are in financial trouble, are starting a business or are dead (these last type of vendors are REALLY hard to negotiate with!).
Cheers,
Aceyducey
PS: One other type of seller - people who were told by their accountant that they should buy a negatively geared property to save them tax & did not see the property as a long-term way of achieving wealth but as a short-term way of making a few bucks.
In 2001 we sold an apartment in an inner Melbourne suburb that had to that point experienced 3 years of strong growth. A well-planned blitzkrieg renovation got us a record price at auction, and the sale freed up equity and cashflow that allowed us to go off and buy a much larger IP elsewhere. Since then, our new IP has virtually doubled in value, while our old apartment would have gone up say 20% in the last couple of years.
In other words, we improved our position by moving our money from one IP to a better IP. When we started out, we fell into the "never ever sell" dogma, but nowadays we simply ask ourselves: where is the best place to put our money?
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Originally posted by Aceyducey
Or is it.....
Anyone got a story where they were better off selling their property rather than keeping it?
I haven't heard one yet, but I've heard lots of people talk about how much better off they would have been if they had not sold.
We almost sold one recently, but ended up keeping it - the house next door (a fairly direct comp) sold two months later for more than $40K more than the price we were prepared to sell at....
Cheers,
Aceyducey
Mums place on Sydney’s northern beaches was valued at $330k (valuation for divorce) in 1997. Sold to a developer in 2002 for $1.45mil. The money was used to purchase a near new 5 bedroom house in Monavale ($800k) and the rest on 2 investment properties which were all next in line for the “boom wave” within 6 months of purchase.
Certainly a better outcome than sitting in that old fibro dump she had before with virtually no income……..
--------------------------------------------------------------------------------
Originally posted by Aceyducey
Or is it.....
Anyone got a story where they were better off selling their property rather than keeping it?
I haven't heard one yet, but I've heard lots of people talk about how much better off they would have been if they had not sold.
We almost sold one recently, but ended up keeping it - the house next door (a fairly direct comp) sold two months later for more than $40K more than the price we were prepared to sell at....
Cheers,
Aceyducey
Mums place on Sydney’s northern beaches was valued at $330k (valuation for divorce) in 1997. Sold to a developer in 2002 for $1.45mil. The money was used to purchase a near new 5 bedroom house in Monavale ($800k) and the rest on 2 investment properties which were all next in line for the “boom wave” within 6 months of purchase.
Certainly a better outcome than sitting in that old fibro dump she had before with virtually no income……..
