How to deal with a bad property?

Discussion in 'Investment Strategy' started by Thanatos, 2nd Jan, 2017.

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  1. Beano

    Beano Well-Known Member

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    Based on sale proceeds what would be the net yield?
     
  2. Angel

    Angel Well-Known Member

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    Hi James
    These are the questions i would be asking myself:
    It looks like you are losing $20K per annum currently. What rent do you think you can get for it once the current lease expires and how difficult will it be to get a tenant, any tenant, at any price. Given you have possibly made $260K equity in your other properties over the last 2 years, if i was you I would cut my losses. The pain of holding has to be more than just the $$$. Have you looked at the For Rent pages lately?
     
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  3. Thanatos

    Thanatos Member

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    $330PW at the moment, but tenant is now on periodic. Reviewing the rentals around my house, it looks like I stand to lose as much as $100PW when the tenant walks. So that's going to bring hold up to $26K. OMG. Not to mention the months it will take to get a tenant.

    You can't believe the conflict. Buying at the top of the market, selling at bottom. Realising the lose now just seems wrong, holding seems wrong, wrong, wrong. Wrong to have bought.

    Any who, selling both properties puts me at around 10-15% LVR (currently 44%, selling Gladstone only, 31%) so I'll be fine. Massive opportunity lost. It's horrific to think of the people that can't sell, truly awful really. Sorry to be a downer on the forum, I'm after no sympathy. Of course I blame the financial advisor guy but I put my family at risk, I made the call.

    At this point I can only look forward to making a solid financial investment in the years to come.

    Kind Regards,
    James
     
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  4. MTR

    MTR Well-Known Member

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    James I don't blame you, but you have move ahead, it takes positive attitude and making some good choices moving forward. Your primary residence is a blue chip property.

    MTR:)
     
  5. Angel

    Angel Well-Known Member

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    Please dont beat yourself up. As MTR says, you are making a positive decision and moving forward. That is much better than hoping the problem goes away by itself, which is what plenty of people would do.
     
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  6. Perthguy

    Perthguy Well-Known Member

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    @Thanatos no need to apologise for being a downer on the forum. We're all here to learn from people who have done well and people who have made mistakes. All we can do is learn from our mistakes and move on and try to do better next time.

    I made a blunder earlier last year. I stupidly paid out a loan thinking I would be able to borrow that amount again. Of course I was wrong and my borrowing capacity has taken a big hit. It's not the end of my investment journey but it is a setback. I am so annoyed at myself but what can I do? What's done is done. I sat down with my mortgage broker and we are developing a finance strategy for my next investments. I just can't shake the feeling of being annoyed at myself for making a stupid mistake.
     
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  7. dan2101

    dan2101 Well-Known Member

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    Mate if I was in your position with that much equity I wouldn't be losing any sleep over a $100k loss!
     
  8. The Y-man

    The Y-man Moderator Staff Member

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    Yeah, wait till you lose 7 figures in the share market - now that hurts!!

    The Y-man
     
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  9. highlighter

    highlighter Well-Known Member

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    Were it me I'd sell both, pay off the PPOR and plan new acquisitions from there. Here's why. Gladstone is unlikely to go up. Renewed momentum requires population growth, income growth and a lack of supply to drive competition in the market. Do you see these returning to Gladstone any time soon? I could be wrong, but I certainly don't.

    As for Wantirna South, it's in the outer, outer city. This is exactly the sort of location at risk of serious underperformance if we enter a downturn and as rates rise - something likely to be on the horizon in the next few years if not sooner. Outer fringe suburbia tends to attract lower-income earners who are vulnerable in recessions, risking price falls. Also, if prices do come down, residents of the area may be inclined to upgrade and move, making it an area with less demand. I like to bang on about Ireland a lot, being from Dublin, but I don't exaggerate when I say most of the price falls there were led by fringe suburbs and new developments (other areas fell, but recovered).

    Buy quality detached family homes in inner established middle income suburbia, even if they're expensive; they will retain demand far better than outer suburbs and demand drives values. In Ireland now, those housing types have recovered very well and even during the recession attracted solid rents. Meanwhile, outer suburban developments are still 30-90% down a decade after the crash began.
     
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  10. Ted Varrick

    Ted Varrick Well-Known Member

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    Y-man, I can't click Like on this post but if there were a "I Wish I Didnt have to Read This" button I would have clicked it... assuming, of course, that you didn't just sell a massive amount of stock in Hunter Hall at $1..
     
  11. Clayton

    Clayton Well-Known Member

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    Hi @Thanatos seems as though were in a similar situation working out how to best move forward on Gladstone. I posted a couple months back, have 5 properties.. i should say investments but i'd happier call a couple liability properties. Holding costs aside from depreciation are around the 10k mark for me but once depreciation factored into the number is bearable. My unit has also gone back around 150k which is much more painful as you know! My first steps is freeing up the crossing of loans my broker got me into then assess again. I'm sure your checking the gladstoneobserver website, definitely looks like theres some light coming to the area, my luck would be I get out with a big loss & then the market shows signs of life. Crazy but i'd be smiling now if it meant I could jump out losing 100k instead of 150. Some good advice on here though selling the negative property before any CG properties. Keep us updated how you proceed, Good luck!
     
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  12. MTR

    MTR Well-Known Member

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    Problem is properties in mining towns are a massive liability, not only because of the capital loss but the fact your there will be continued losses and opportunities missed because its a noose around your neck, not to mention the daily stress this will cause.

    Fortunately you have had some great gains on other properties, just make sure you get the tax side of it correct so you can offset losses with profits.

    The idea of holding properties in mining towns today is a bad one because there are no signs of recovery, mining boom is over, I read somewhere that mining booms cycles are longer than property boom cycles, something like 20 years? no idea, however the ability to source finance may also be an issue while holding the Gladstone property
     
  13. Clayton

    Clayton Well-Known Member

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    Hi James, would be great to get an update how you went with the Gladstone property. Sell both & cut loss's or still holding? I'll try find the right thread to see how Gladstone is moving on the ground knowing that vacancy rates are dropping.