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Hello from Perth

Discussion in 'Introductions' started by Username86, 1st Jun, 2016.

  1. Username86

    Username86 Well-Known Member

    Joined:
    31st May, 2016
    Posts:
    62
    Location:
    Perth
    Hi everyone. I have been reading this forum religiously for about 2 weeks now. Lots of great information available here.

    We currently own 2 IP’s and rent near where I am studying. One property I am really happy with, a 2 bed 2 bath unit in Herston QLD and another unit in Broome WA that started as a PPOR that we decided to keep before moving to Perth. Since renting the unit in Broome rents and values have been falling with periods of extended vacancy. We have long known that this property needs to go but due to the loan being about 80k above what we would expect to sell for we are not sure what the best exit strategy is. These are the options we have come up with.

    1. Save/Repay loan until debt is less than sale price.

    2. Sell now and take on a personal loan

    3. Sell both properties, and still probably have some outstanding debt.

    4. Continue with our investing journey until such time we have enough equity to cover the difference then sell.
    Currently serviceability is not very good while I study but when I finish around October I should have substantial excess income to help achieve our goals.

    Would love to hear everyone’s thoughts on our situation. Feel free to PM if you wish.

    This has been very costly lesson for us but we are still very optimistic about investing in property, for our next purchase we are considering a PPOR with renovation potential so we can earn some sweat equity to help us to continue to invest. Thanks everyone for the great info and I look forward to your responses.
     
  2. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,113
    Location:
    Brisbane
    Hey @Username86 , welcome aboard.
    At least you can recognise that it's a lesson, albeit an expensive one.
    Hopefully there's someone here who can give you some advice.
     
  3. Username86

    Username86 Well-Known Member

    Joined:
    31st May, 2016
    Posts:
    62
    Location:
    Perth
    Thanks Azazel.
     
  4. bob shovel

    bob shovel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,383
    Location:
    Somewhere in the land of Oz
    Gday username, welcome.

    There was a podcast on the property couch running through similar scenario. But you want to check all avenues before selling. I'd think your brissy one would be good to hold and get some cg soon, I'm not familiar with the unit market but location looks great!

    What's on the forecast for broome? Have you looked at future works or infrastructure that's planned to help get things moving?
     
  5. Leo2413

    Leo2413 Well-Known Member Premium Member

    Joined:
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    Posts:
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    Location:
    Sydney
    @Username86 I would be investigating the market to see where its at and what chance there is of an upturn anytime in the future. Sounds like you have negative equity of 80k ouch. I would try to get the Broome unit rented asap even if you need to reduce some rent. It would absolutely be my last option to realise an 80k loss then have to take another loan to repay that.

    Your plan to buy a ppor to renovate then refinance sounds good, just make sure you buy the right property, for the right price with a good price differential from unrenovated stock to renovated so you can get an uplift upon revaluation.

    If you haven't already, I would be learning as much as you can about PI. Books, internet, forums, networking. That's how you greatly reduce much of the risk. Good luck
     
  6. Username86

    Username86 Well-Known Member

    Joined:
    31st May, 2016
    Posts:
    62
    Location:
    Perth
    Thanks for the info Bob and Leo. I'm also very reluctant to sell as realising such a loss would take some time to come back from. We have received an application yesterday after several rent decreases, which sounds hopeful. As you suggested Leo I have been learning as much as I can lately, I almost feel like I can't get enough information right now. Since stumbling across this forum there's not enough hours in the day in-between school and study to get all my reading done.
     
  7. Westminster

    Westminster Tigress at Tiger Developments Business Member

    Joined:
    13th Jun, 2015
    Posts:
    2,959
    Location:
    Perth
    I gather the QLD unit doesn't have enough equity to cover the losses of Broome if you were to sell.

    You have a window of up to 6yrs to keep the Broome property as your main resident/PPOR and sell CGT free IF prices go up. At the moment that is no assistance to you though. But it does mean you'd need to keep renting for that period of time until you sell it.

    If serviceability is not good at the moment you don't have many options as even selling at a loss will require income to service a loan for the shortfall.

    If you do sell at a loss then you may be able to carry forward the loss until you make a gain one day - but that is best for an accountant to advise on - and I'm not one.

    All I can say at the moment is you are in a tough place and it might be best to wait until you graduate and have the extra income until you decide what you want to do.

    BTW welcome!!
     
  8. Username86

    Username86 Well-Known Member

    Joined:
    31st May, 2016
    Posts:
    62
    Location:
    Perth
    Thanks Westminster. Bought the unit at 92% LVR so no usable equity at this stage but it has shown good signs of CG. As you say main residence exemption isn't much help as I'm not expecting any gains in the next 2 years. My plan was to hold and wait at this stage so its reassuring to know that others would do the same.
     
  9. DiligentPM

    DiligentPM Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    443
    Location:
    Brisbane
    We have excellent brokers on this forum who could offer you some good advice moving forward. Send me a PM if you would like more information