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NSW Auburn 1st IP - keep it or sell it?

Discussion in 'Where to Buy' started by JayOh, 6th Aug, 2016.

  1. JayOh

    JayOh Member

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    24th Jun, 2015
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    Sydney
    Hi guys,

    We have one IP at the moment, a 2 br house in Auburn purchased in 2012. It's done well for us financially but after the latest in a series of tenant issues we are trying to decide whether to sell it and look for an area with better tenants, or keep it and put up with the dodgy tenants.

    We had a valuation done in Feb 2015 which came back +$190k on our purchase price. We refinanced at the new valuation but haven't drawn down on it as yet, so basically we're in a good position to purchase a second property if we keep it. If we sell it, we'll be up for a big CGT bill.

    On the other hand we've had a constant run of weird and dodgy tenants - the first lot started off ok then stopped paying rent so our PM had to evict them. They left a big mess and some minor damage. Second tenants were 4 Bangladeshi refugees through the Red Cross - rent-wise they were great and stayed for about 18 months, but they also left a big mess and cigarette burns in the new carpet. Next tenants were a young couple who loved the house and asked if we would sell it but then decided to move to QLD. They tried to turn the backyard into a mini farm with a veggie patch and chickens and a big dog. They covered the yard with straw which killed most of the lawn and the dog scratched up the back door and one of the bedroom doors. The last tenant was a single mum who seemed fine for a few weeks then the noise complaints started and she stopped paying rent at the end of May and we have only just managed to get access to the house again - going to have a look today to see what kind of mess and damage she has left.

    Every time the house goes on the market it takes a while to find a tenant and we haven't managed to find a sane tenant so far, so we're thinking that maybe we bought the wrong house, or in the wrong location or both. Not sure about our PM either, if we keep the house we'll more than likely go with a different PM.

    My thinking is that we should keep it for the moment, use the equity to buy number 2 and just put up with the dodgy tenants.

    Or should we cut it loose and start again elsewhere?

    Thanks!
     
  2. bobbyj

    bobbyj Well-Known Member

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    Are you happy with your PM?
    Sounds like they're finding suboptimal tenants. Was it your call to accept them?

    I'd look at it purely from a numbers point of view. Is it a sustainable investment including costs of damages and delayed rent?
    I have a similar tenant in SEQ and rent comes late. They've trashed the place but want to stay.
    I don't really mind as I have a great PM who's doing the stressing for me. I just reply to their emails with 'OK. Thanks'
    I'm seeing decent capital growth and its positive geared so I'm fine provided the house doesn't fall down.
     
    Dean Collins and eskander like this.
  3. JayOh

    JayOh Member

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    Not happy with the PM, they haven't been managing the tenants well and communication is very frustrating. I had to ask about the missing rent before they did anything about it and trying to get an answer from them usually requires several emails, several days waiting and an escalation to the agency owner to get a response.

    We've always had the final say on the tenants but in every case the tenants we accepted were the only ones to lodge an application, which got us thinking about the types of tenants we were attracting and whether it was the wrong property or wrong location and we were just getting the typical tenant for the area.

    Financially it's ok, the rent covers the interest payment and a few other bills. It's not positive geared, we still need to chip in a little bit every year, but really it isn't costing us much to own and the CG has been very good.
     
  4. ashish1137

    ashish1137 Well-Known Member

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    I'd say to spend on the property and get good tenants. Change PM as well.

    Regards
     
    krispy likes this.
  5. Scott No Mates

    Scott No Mates Well-Known Member

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    Auburn has it's own demographic. So you will always end up with a similar tenant pool.

    Having a firmer pm may help too. Outfits like Star Partners work the area so may be worth a shot.
     
    Dean Collins likes this.
  6. hash_investor

    hash_investor Well-Known Member

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    I would say sell it.

    Let us accept the fact that it was a bad purchase. Although you still did well with the equity but that was because of the general rise in the market overall. A 2 bed house in Auburn is not going to attract a better category tenant. No family will be looking for 2 beds. It will always be someone with a unique situation.
     
    Tekoz likes this.
  7. menty

    menty Well-Known Member

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    I know a good PM im using in the auburn area if you are interested.
    That being said, I have a very good quality apartment just renovated that took a while to rent out in the area (which normally should of rented out in a week or 2) . Market is definitely a bit funny at the moment
     
  8. hash_investor

    hash_investor Well-Known Member

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    Auburn is a funny market. It is right in the middle of pricey inner west which pushes the price up but people don't want to spend money there because of the stigma.

    LL wants more rent because neighboring suburbs are expensive but everyone who can afford moves out of Auburn :)
     
  9. Tekoz

    Tekoz Well-Known Member

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    Which means the suggestion is to keep it for the longer terms.

    See Redfern, Surry Hills, Schofields, Riverstone and Leppington.

    Those suburbs now have become the most sought after place which attracts higher CG due to the price increase on the land & Property itself.

    You just need to hold it longer like 1 decade for example, so the general population will certainly change.
     
    Dean Collins likes this.
  10. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Interestingly, I've had 2 sets of Airbnb guests coming from Auburn. One of them I didn't/haven't met but the other I have - he needed a place to live for a few weeks. This was from nearly a year ago now, great guy and I'm still in touch with him. He later moved to a house in Eastwood.

    As @hash_investor said, I think it's a place people start from and then move out of when they can to a better area... People tend not to move from a better area to Auburn unless there's a compelling reason.

    @Tekoz could be right - it has transport and land and it's reasonably well located geographically in Sydney. It might just need time to turnaround as an area.... How much time is the question...
     
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  11. JayOh

    JayOh Member

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    We always thought the house would appeal to couples and young families and the street seems to have a lot of people that fit into this category - we have a complex of townhouses across the road and most people we see tend to be in their 20's or 30's. Most of our tenants have wanted a house with a backyard.

    Our plan was to hold for the long term and develop it when possible to turn it into 3 beds and parking.
     
    Tekoz likes this.