Hawthorne (Brisbane) IP - Keep or Sell?

Hi all, seeking opinions on my current situation:

• Purchased new small lot home in Hawthorne in 2009 for $620k as PPOR... new cheap 3/2/2 home build on 190m2 land.
• Moved out and changed to IP1 start of 2015 to move to Sydney.
• Rents for approx $650/wk
• Current outstanding loan $300k (also re-fied in 2018 with second $350k loan fully offset, never used)
• House valued at 940k by bank but likely only would sell for $800-850k
• UCV of land $430k
• 6 year absence rule ends in January
• IP is in both me and wifes name - I'm high income ($250k+) and she's stay at home.
• After all costs etc it's cashflow neutral (slightly positive)

This was my first home so I probably didn't purchase right (small lot) and although I picked the right suburb, it's probably performed half way between a unit and house in the area ie: 33% gain over 11 years.

For an example of the build, it's in the group of homes like this in Hawthorne https://www.realestate.com.au/property/20-beatrice-st-hawthorne-qld-4171

I'm looking to buy a new PPOR in the next 1-2 years so given current climate etc do I sell this place off and concentrate on using all equity towards PPOR.

Seems like possibly a good time to get out given 6 years is almost up and its probably an underperforming asset and maybe pick up another IP with better fundamentals after PPOR purchase?

Or is it best not to incur transaction costs and keep the refi loan on tap?

Just not sure what to do in this example of what I see is, right suburb, wrong property.

I'm happy to hold it but need an objective opinion - am I holding a lemon?!

Thanks in advance!

 

Hopefully won’t take till January to sell? Tax free gain is tempting I’m sure.

long term the fundamentals are good for Hawthorne, but if it’s not where you want to live then maybe take the $$.

Selling vacant and styling could get you a better price.

 

To make use of the PPOR ruling don’t you have to move back in for a certain period?

 

Thanks for the thoughts re selling vacant and styled! My understanding is the 6 year rule means I can still hold but can only claim CGT exemption for the first 6 years... ie I pay CGT on any CG after January.

No, my understanding is no need to move back in. You can move back if you wanted to reset the 6 year CGT exemption period so it rolls over again.

 

Cheers all, have done some research on the Hawthorne/Bulimba area and Brisbane decided to hold long term.

 

When Brisbane grows, Hawthorne/Bulimba will definitely be one of the first suburbs to see the growth- very desirable. The living density is also increasing all the time, eventually your house will be considered a large block when everyone else is living in townhouses!

I'm also surprised something like 20 Beatrice is only renting for $650wk, there's a number of townhouses now (admittedly, very nice ones) renting for quite a bit more than that. We're obviously in a bit of a touchy market now, but once we come out on the other side of COVID and all the Hawthorne executives are comfortable again, I think you'll be pleasantly surprised with the achievable rent on that.

 

Hey Tom, seeing as Hawthorn is the suburb next door thought I'd ask for your take on a 1990 2bd townhouse, Richmond rd Morningside. My fixed interest rate (4.49% yes i know thats painful but fixed 3 years when everyone was saying to do so) anyway comes of end of the year and starting to consider my options. Bought 385k which includes a buyers agent fee, and guessing sits at the same mark now. Rent has frustratingly fluctuated around the 360pw mark since purchase.
Thinking best i pull the 100k i have and put it into another property's offset account to reduce expenses. I've had it 5 years and tired of the no growth aspect with holding costs at present are around 6k before depreciation.
Cheers mate

 

Hard to say, Morningside is supposed to see some really good growth as it's a desirable middle-ring suburb, BUT units/townhouses are still off-vogue in Brisbane, and probably will be for a long while yet. You probably wont do badly to hold onto it, but probably wont do exceptionally well either.

I think your head is in the right place- you're considering the opportunity cost of holding the property. It sounds like it's just about paying for itself ($6k holding costs vs principal paydown on the mortgage?) but where else could you better use $100k for a better return?

 

Hi @Tom Rivera thank you for the insight, this is exactly what I was looking for. Will look at getting a rent re-appraisal on the other side of COVID!

 

Much appreciated Tom! 6k costs on Interest only, I'll discuss with my accountant once the latest return is completed to see how it sits. A topic for another discussion but have a gladstone unit backward of about 150k in value so was thinking just putting the cash into that to lessen the bleeding costs. Tempted to take a big loss & sell both but trying to get the on the ground feeling for recovery in those areas before considering. Cheers again