200K book loss, crystalise or ride out?

**** happens to all of us mate, you've learned your lesson, keep moving forward. Like a number of people've said, hold on to it. It's going to be a pot of gold some years down the track, property's a long term game anyway. Is the current rent the norm for the area? Maybe see if you can do some minor reno to bump up the rental income?

 

whats the point in holding a poor performing property that is costing money and using equity and borrowing capacity up? It sounds like it is the fear of crystalising a loss.

If you sold and put that money to better use could that loss be recouped quicker?

 

Thanks...HOPEFULLY.

The rent is at market value according to the agents and not much more really can be done with these homes to improve the value or income.

I dont aim for much, if no losses on the capital, I'd be happy.

At the moment - I can't think of anything nor would I have the balls to do anything else at the risk of losing even more or things getting even worse. I'm not much of a gambler or investor as you can see...

 

You need more basis for current value than one recent nearby sale. It may have been an aberration for the area. Maybe desperate seller and few interested buyers?

And always look forward, not back. Recent reports seem to indicate that the Melbourne market is no longer falling, so maybe holding for a bit longer will give you a clearer picture.

 

I should point out that I don't know anything about that location.

The advantage in not selling is that you don't waste 10% - which is basically what you would lose if selling one property to buy another. If you don't plan on investing elsewhere if you did sell then work out what the property is costing you per week/year and then work out if you think it will grow by this much at least.

If you are losing $5,000 per year it should be growing at least by $5,000 per year to be moving forward, for example

 

Still up 20% gross but 10% after cost. Would be at least double that in most other suburbs within 25 k.m. East of CBD (part of Melbourne I am a familiar with)

 

Interesting reply post. At the time, my heart was set at about a 760K price range max but the Mrs. (inexperienced and all) got sucked into the atmosphere and went overboard, FOMO at the time. If anything the gamble with HW/HH was that it was a unpolished Chaddy (where we live). Ashwood, Chadstone and the old Jordanville (now part of Chaddy) and Ashburton were all diamonds in the rough surrounded by pricier suburbs. My folks bought in 2005 and seen it pretty much converted quite quickly.

One day my hope and dream is to fetch something around this https://www.realestate.com.au/property/11-bega-st-chadstone-vic-3148. Heck, I'll be happy to be even on 870K - 900K to break even. This one is even on the end of a T intersection!

 

What was your plan/strategy when buying this IP2 ? Were you aware of the actual hold cost ?

If sell then you'll be alleviated from the negative cash flow but will have lost a significant chunk from stamp duty, commission and the fallen value.

If hold, then the negative gearing may be offset by a tax relief if you're on a high tax bracket..plus get to keep potential future gain

IP1 is also negatively geared but seems like you don't regret buying it ? If so then just forget about the drop in IP2 value and don't bother following its market value again till another 10-15years time and its value will likely to have doubled by then.

 

Long story cut short, initially we didn't look at IP2 intentionally, our plan was basically to achieve a 50-60K passive income when we retire and got too caught up with the FOMO at the time and also backed up by our IP1 success. Deep down though as well as my own analysis of the market, backed up by comments here in pc I predicted a downfall, the Mrs. was hellbent on FOMO and auctioned it herself.

Yes, I am on a tax bracket and that can use it for tax relief at the moment.

IP1 is negatively geared and also used for tax relief, I don't regret buying it, it's served me well so far and pretty much offsets my losses on IP2 if I sold both today. Yes, I've figured best not to look at realestate.com.au weekly now and revisit every year or two.

 

so how did you plan for IP1 and/or IP2 to provide a 50K passive income and over what time frame ?

 

btw your total LVR appears to be quite low at 37% so what is the issue of hanging on to IP2? .... other than just the temp paper losses bad feeling ... gee and I thought I was a drama queen ...lol

If Total Loan = 620K as you have stated then they shouldn't be negative but +ve CF.

 

I doubt there are many people on here who havent made mistakes...its all part of the learning process ☺. A rising market and time will help - dont stress you will be right and wiser for next time!

 

In my opinion only, the 'cheaper' suburbs are lagging behind the 'expensive' suburbs by approx 1-2 years. I think what you will find is that prices in HW/HH are still correcting and will bottom out shortly, if the trend of rising prices continues then HW/HH will start to pickup again over the next 6-12 months.

Long term, you can't go wrong, you will make a profit.

I would hold as time will correct all mistakes. Sure you can sell for a loss and buy something with better potential but you have selling costs and buying costs only adding to your loss.

 

Be careful with this suggestion, remember that in Vic you can’t rent a GF as a seperate lease (ie 2 incomes for 1 property title) as you can in NSW and parts of Qld.
A GF can only be rented under the same head lease (ie offered with house lease as a genuine teenagers / granny’s retreat).
This is different of course a different scenario to having two units on one title.
Good luck!

 

Thanks, I was aware of that though.

 

I too used to think it was GirlFriend but now i see GF as gluten free as everybody claims to be gluten intolerent these days...... that is until they get served a gf dish they dont like, of which they will suddenly become gf tolerent

 

I’d hold that for sure. Unless the house itself is an absolute dog.

Actually. If I was going to buy. I would be looking in near where that house is now. I can’t see it getting cheaper there over the next 10 years. Too gooda geography.