Give up OTP deposit and save for another property?

Hi guys, I bought an OTP in Liverpool NSW a while ago and due to settle now (Feb 2020), here are the details:

-2bed,2bath,1car unit
-Sales price: $590k
-10% deposit paid
-Bank valuation now: $560k
-Already paid stamp duty $17k
-will be investment property
-walking distance to hospital/westfield/train station

I bought the OTP during the peak time, it looks like the similar property for sale are around $500k now (brand new as well). I did a rough calculation, I can only 'break even' when I sell the property for at least $650k in the future. Which is very unlikely to happen in next few years. If I proceed with the settlement, it will be negative cash flow for me.

I now live in my PPOR and have 2 kids. I want to buy a house/townhouse in the near future. Is it better for me just 'walk away' from the OTP, give up 10% deposit (~$5.9k) and save more to buy a house/townhouse in the near future? Any ideas welcome!

 

Be careful here....if there is a loss by the developer they may pursue for costs.

Have you considered settling and then selling it on?

 

How is your deposit 6k?

 

Can you afford to want to 'walk away' from $59,000 deposit you've already paid??

 

Is deposit 10% or 1%? If it’s 10% I wouldn’t throw away 59k! Market in Sydney on the improve, in two years it might be worth what you paid for it. IMO, you should hold on and see what the market does the next 12-24 months and then reassess. If it’s 1% I would probably take the loss but get legal advice to ensure it’s only the 1% deposit you lose.

 

question is if they can come after you for any shortfall between the deposit and what they resell it for ?

Cliff

 

You have entered into a contract with a developer who has kept their side of the agreement. Unless the developer has done something to give rise to a breach of the essential terms eg. gone past the sunset date you will have very few rights to terminate.

Be assured that the developer will seek specific performance and it may cause severe damage to your credit file and any other property that you hold.

Seek legal and financial advice before considering termination of the contract.

The OP will have ⅔ of SFA.

 

So you have a deposit of $59K and $17K duty in + legals. That is $78K but the property has a val of $560K. So if you sell you would also incur selling costs. Lets say thats $14K So you will lose $63K

Or if you fail to complete you will lose $76K + face legal action for further losses. + legal costs + impact on credit rating etc. It may mean your own home is at risk.

You need to weigh up the neg cashflow if its retained as a rental and adjust this for depreciation deductions etc. The neg cashflow will be substantially improved by the tax refund issues. You need to know what that looks like. Will it cost you $15 a week or $500 a week ?

 

Read your contract to see if the developer can come after you for the shortfall.

I think you can also try to onsell the contract to someone else.

 

Have you Val shopped?
Don’t take the 560k as gospel just yet.
See a broker who MAY get you a better result.