Leaving Australia, should I sell?

Hi friends First-time caller long time listener etc.

Got a dilemma, and not sure if this is the right forum. But thought I'd ask.

I bought a property in Sep 2016 in Pakenham, Vic. 4br house. Bought for $390k. 375m2 lot. 10 year old house. We added some improvements (some landscaping - artificial grass, no maintenance! And a very nice deck). I think it's probably worth about $440k-$450k based on comparable sales.

My family and I will be moving to the United States in the next couple of years. My dilemma: do I keep the house and rent it out, or sell?

The financial output of renting it out won't be too much. I'll have to pay some land tax but it'll be less than $700 a year. There will obviously be maintenance, etc, but it works out okay.

My question: will any potential capital appreciation be worth it? I've had advice from Americans telling me to sell it because who knows what will happen in the property market, it could crash, I could go into financial ruin, etc.

The other con: if I sell in the states, I'll have to pay 32.5% tax on the sale. If I sell now, I won't have to pay anything.

So let's say I sell right now at $450k. I walk away with net $110k.

Let's say I wait five years and sell it for $500k or whatever. I might have $200k in equity, but because I'll pay 32.5% tax on the sale, I walk away with $135k net.

So...the extra benefit isn't worth that much. Should I sell right before we leave, or keep it?

 

Unknown. Likely not for many years. Over a decade.

 

Go into financial ruin with a 290k debt and 110k in equity and a job earning usd.

Id say your friends should be the last people to be giving financial advice.

 

Haha I was just doing round numbers, it's $340k debt but about $100k in equity now.

The quote I've been given is "If everything goes right for you, in 10 years you could end up with low double digits profit but only of if most things (that are out of control) go your way".

Worst case scenario is financial ruin, according to them. Complete market crash.

 

Agreed need to analyse the figures. But a complete market crash would mean the entire world economy has gone downhill (which i cant see happening) and then you have massive social unrest and financial ruin will be the least of ones concern.

Would be yellow vests on steroids.

 

They raise a good point though. Could Pakenham prices drop so far the sale later becomes worth less than a sale now?

 

Yes that is possible.

 

Also being pointed out to me that selling the property and investing in equities would be a better use of the money.

I'm not sure. I would rather keep the house in Aus given we *may* end up coming back, but just not sure.

 

What if equities dropped 40% as some are suggesting (not saying it will happen).

 

Right, but I guess the question is whether I'm going to get a better return by selling and investing in equities versus keeping the property.

 

I mean, the assumption here is that Australian property will increase over time. That's not necessarily a given.

 

To me, it depends on if you consider Australia your “home” country, i.e., where you have the strongest family and/or cultural connections. If it is Australia, and if there is a possibility you will return some day, even if not until retirement, then I would hold the property.

If you consider another country your “home”, and the chances of returning to Australia remote, then probably sell.
Marg

 

Really? When has that ever not been the case?

You don’t seem to know squat about equities.

Your American friends don’t know squat about Australian real estate. Theirs crashed and burned, ours didn’t.

 

The S&P500 has gained on average about 9-10% over the long term. Australian property hasn't produced returns of that magnitude across the board.

If that was the case, my little 4br property in Pakenham will be worth $800,000 in 10 years. That's simply not going to happen.

 

I wouldn’t say it’s impossible Pakenham would be $800k in 10 years time. My parents first home in Sydney they sold for $192k in late 1995. Last sale in mid 2015 it resold for 1.32mill. No major changes made to the house in that time. That’s a tad over 10% annual growth over the 20 year period.

Also, we bought a home in the Sydney suburbs, mid-late 2008 for $695k. I was doing some basic maths to work out if it grew at x percent annually, when would it be worth a million. Turns out my maths was correct and it didn’t take long for it to get to $1 mill. But at the time when we bought it for under $700k, I thought $1 mill was a mind blowingly huge number.

Now, it’s not. In Sydney I think $2 mill is the new $1 mill.

And @wylie had that comment about people getting priced out, that’s real. Lots of people who had property in Sydney and sold up to move elsewhere, when they wanted to move back they found that they couldn’t afford to buy back in.

 

No idea! That's why I'm asking. I just don't think advice like "property always goes up by more than equities" is particularly good or realistic.