Any point in holding on ?

Bought a 4/2/2 bedroom home in Redbank Plains Ipswich in Sept 2013, 5 years old for $315. Holding costs after tax slightly positive and we have good long term tenants now (after we managed to get rid of the horrid ones - was that a nightmare but I digress), so its low hassle at the moment. Thing is It was one of my first buys and I hate to say it but I wonder if its a flop. Not a lemon as such, just a disappointment. One reads media reports about growth in the area but I'm not sure I believe any of the media anymore, they seem to be completely off the mark as to what is actually happening on the ground half the time. I see you can buy a brand new one in the area for $360-$380 offering sparkly new for OO and depreciation for investors. So am I just wasting my time here ? If I cash out I will probably lose $10k or so but whats the point if there is such low growth for years and years whilst you still have maintenance, rates and risk not to mention opportunity cost of getting better growth elsewhere plus whether you like it or not the banks put the numbers in their EVER CHANGING servicing calculators and it just keeps getting worse!!! OR am I just being a typical impatient investor watching all the smug Sydney investors make a fortune every month that goes by which lets be honest doesn't make the rest of us feel great now does it. Thoughts ?

 

Property is a long teem investment, 4 years is not long term.

If it's not costing you why not use the equity by borrowing against it?

 

How much is a 4/2/2 in Sydney now on a bad day?

 

Leveraging equity can only be a consideration if LVR is sitting at 60% otherwise double lmi kicks on

 

In Sydney you need a million .... for pretty much anything

 

Hi Jenny,

As @Scott No Mates said, property investment is a long term game so patience is key here, especially in the Brissie market which is slow and steady. So don't expect the same type of crazy boom that we've just experienced in Sydney for the last couple of years

Suspect if the purchase price haven't gone up much then you won't have much equity to leverage off. However if the property is paying itself off and giving you some cashflow then that's good because you'll be able to hold it when interest rate does go up. So if I was you I would keep holding it until you have enough equity to be able to pull out to fund the next one. During the meantime save, save and save so you can keep going!

 

Not sure what you mean here? Anything under 80% and you won't pay any LMI. Over 80% and you may be able to get a credit for what you've already paid.

 

What sort of growth did you expect ?

To me it is unrealistic to expect Sydney growth (during up swing) anywhere but in Sydney, especially if just looking at the $ figure.

 

Val just came in at $340, LVR at 88% and now on P&I so I can either cut n run with a break even scenario if lucky or just hold and build equity over time ... what would I do with the funds If cashed out ? Probably just throw into IP buffer account or ppor loan - or maybe some shares mmmmmm there's a thought - serviceability for another IP will be a challenge and not much I can do with $30k

 

Not sure maybe 3-5% pa .. is that crazy???

 

Could you elaborate on what you meant by this for those of us who don't understand what the point was?

 

What size lot are you on?

Can you renovate to increase equity?

 

OP bought a 4/2/2 in Redbank Plains for 315k and is talking about selling up and investing elsewhere. How much would a comparable property be in Sydney now?

 

Hard to say.

The thing that makes me very wary is the location. Redbank Plains is a low socio-economic area. It is very oversupplied with a lot of recent development aimed not at Ipswich, but mostly at Brisbane buyers. Ipswich doesn't really have a lot of industry - it's a very small city. So naturally you rely on people from Brisbane wanting to live on the outer fringe. I've talked about fringe suburban risks before - often these are areas where people buy and live in that location because of lower incomes - investors with smaller deposits, buyers who can't afford closer in. The proportion of people who already own their houses (such as you see in established suburbs) is much, much lower, so there's higher volatility. It's a bigger risk in a downturn because these buyers are more likely to bust, and investors are at their mercy.

Another thing is development. These city fringe areas are where Brisbane's overstock in houses is located (apartments being a whole other issue). Being from Ireland, I am very wary of these city fringe regions because they fell first, fell hardest, and did not recover - even still most are way down. If a bust occurs, or even a protracted slowdown, you'll get the issue of developers struggling to offload blocks they bought in bulk, which leads to often sharp discounting. A developer who owns 50 blocks for example might be comfortable dropping their asking price in a pinch, but this affects all investors in that location - and your personal bottom line might not have that sort of wiggle room.

If you look at surrounding suburbs like Springfield Lakes, Augustine Heights etc there is an awful lot of stock sitting there on the market, discounting is occurring already. There's a lot of competition for buyers and not a lot of buyers going. Contrast this with houses in more tightly held, inner suburbs - where buyers and investors are mostly owner-occupiers, who'll hold on, they're middle income etc. If prices come down anywhere else (and Brisbane's not seeing terribly strong growth right now) house buyers are likely to look further in, to those more popular inner suburbs.

I'd personally invest elsewhere, even in Brisbane but in a more popular suburb, not on the fringe, dominated by middle-income owner occupiers.

 

So if you went back just under 4 years to when you purchased this property would you buy it again knowing what you know now with all the ups and downs..
If the answer is no then the value range may well stay at those levels or drop with all the new developments in that area but that's only based on a vibe and a guess ..imho..

 

So you think the growth in Redbank is going to be the same as the growth in Sydney?
Not all property appreciates at the same rate. It is driven by demand and Redbank Plains will never have anything remotely like the demand as in Sydney.
There was a good example on a podcast on the property couch about that where they compared 2 properties (both in Victoria if I recall), one was 6% compounded over 30 years and one 10% compounded over 30 years. The difference was that one of them is now worth about 300k and the other is worth 1mil.

 

$315k in 2013 for Sydney was half the price of a median house ===> linky, so Sydney wasn't an option for the OP. Even at median unit prices were at $550k ===> slinky.

If the OP was keen, she could have bought in @datto's back yard for sub-$300k ===> lanky as picked by @Jennifer Duke in her article. Current realestate.com.au pegs it at roughly $630k & $415k for units (admittedly, there weren't many 4/2/2 in the Druitt more like 2/1/- or 3/2/1 fibro homes).

 

Thanks for the insight. Glad it makes sense to you now.