Sell and buy elsewhere or hold?

Discussion in 'Investment Strategy' started by pinewood, 19th Jan, 2018.

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  1. pinewood

    pinewood Well-Known Member

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    Hello everyone,

    Just wondering if anyone can share some thoughts. My parents in their mid 70s are keen to sell their investment property in Kensington, Vic bought in the late 90s. Rental is only $385pw. The tenancy is ending in April. It is in a good location near the train station but they don't feel like they have the energy to rennovate the property or continue with maintenance issues e.g. the garden needs doing, tree needs to be chopped, shed removed and replaced.

    Is it a good idea to sell, then buy something newer or given the proximity to the city to hold onto it and spend more money and bring the rent up? In it's current state it may sell in the high 700s.... though the neighbours either side are worth over 1 million and rental $585.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Lots of things to consider - buying and selling costs for starters. CGT would be triggered, stamp duty etc etc.
    Loans needed?
     
  3. Trainee

    Trainee Well-Known Member

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    All things that you can hire people for?

    Too many options without knowing their circumstances.
     
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  4. pinewood

    pinewood Well-Known Member

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    Thanks Terry, yes aware of the costs and CGT ....I think they are looking at buying another property with whatever money is left, both retired.
     
  5. Trainee

    Trainee Well-Known Member

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    If they arent borrowing money, just buy a index fund? No maintenance.
     
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  6. pinewood

    pinewood Well-Known Member

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    I agree, I'm just wanting them to consider their decisions wisely and get some idea of what others might do in a similar situation.
     
  7. 738

    738 Well-Known Member

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    If it is a period home in Kensington I think it would be worth more than in the 700’s
     
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  8. hobartchic

    hobartchic Well-Known Member

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    Isn't the whole point of the property to have money for retirement? Why not sell and enjoy the money? Bank some of it...life does not go on forever.
     
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  9. pinewood

    pinewood Well-Known Member

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    agree.. I like this idea! I think they want to have something to pass onto the next generation.
     
  10. Marg4000

    Marg4000 Well-Known Member

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    If their wish is to retain an IP (and I am assuming they have a PPOR they are happy with and don’t want to upgrade), then it makes little sense to sell one and buy another.

    CGT (if applicable, and, if not, then even more reason to hang on to it), selling commission, buying costs and stamp duty will eat up close to $100K or more.

    Is money available to have the work done to upgrade the existing IP? If so, that may be a good option.
    Marg
     
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  11. pinewood

    pinewood Well-Known Member

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    Thank you for your helpful insight, Marg. I think upgrading is a good idea too.
     
  12. Big Will

    Big Will Well-Known Member

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    I would be more inclined to hold as it is a very well located property and give it a good renovation so they don't have to worry about things at the property except minor maintenance issues for the rest of their life - all of this through hired help.

    This would then increase the property value, rentability (word?), income and still keep great capital gains they can then pass onto the family or sell in the future.

    If they were looking at selling at the age of mid 70s it is unlikely it would be a worth wild to rebuy except in a trust since it will last 100 years due to the very high changeover cost so if they wanted the money to be invested I would pick something low risk such as ETFs or LICs.

    Buying shares in the ETFs and LICs would give them flexability to sell down some of the holding in the future should they require some additional injection (medical bill, new car, holiday etc) along with income without any maintenance.

    From my personal thoughts it would be;

    1. Renovate IP - Keep capital gains coming and something tangible to pass down and would improve cashflow.
    2. Sell IP and buy ETFs/LICs - Easier solutions with no maintenance issue but not tangible.
    3. Hold IP and rent out - When they have seriously had enough with property then look at step 2
    4. Sell IP and keep money in cash/blow it all - Keeping in cash will not keep up with inflation but if they only have 2 years left to live due to medical reason then this could be an option.
     
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  13. pinewood

    pinewood Well-Known Member

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    Thank you so much @Big Will for your wonderful suggestions! I really appreciate your thoughtful considerations and your time spent in sharing them. :)
     
  14. pinewood

    pinewood Well-Known Member

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    Do you think so, even if it's not renovated?
     
  15. MyDarlinghurst

    MyDarlinghurst Well-Known Member

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    good thinking ;) think of yourself,if u have any brains get them to sign the house over to you now so your siblings dont know
     
  16. hobartchic

    hobartchic Well-Known Member

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    Surely their home is paid off which would go to the next generation. Who wants maintenance hassles in their retirement? If they find themselves very unwell the work falls to the next generation too.
     
  17. pinewood

    pinewood Well-Known Member

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    Agree but also feel either way whether to keep or sell, the property will provide improved returns if some sprucing up is done to it.
     
  18. jyeung80

    jyeung80 Well-Known Member

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    Doesn't your tenant maintain the garden? I have 2 IP's and tenant is responsible for general garden maintenance for both. One of them is in Kensington too. Other things you should be able to get the property manager to sort out, assuming they have one.

    Agree with the option to spruce up. If they keep it they should be able to get more rent + depreciation. If they sell it, they should at least be able to make back what they put in. Are u able to manage the renos for them?

    I'm going to eventually help sell my mum's PPOR and will definitely at least do a cosmetic reno before selling it as it's not in the best condition. It's 2 doors down from me though so easy for me to manage the reno for her. No way she'd be up for doing it on her own.
     
  19. Ed Barton

    Ed Barton Well-Known Member

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    If it's just 'sprucing' that is needed surely you can do, or organise that? If it's a dump then that's another matter.

    Why is the rent so low? Is it a reflection of the property or are your parents the old keep the rent low types?
     
  20. Medine

    Medine Well-Known Member

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    One of the hardest things I see my clients struggle with is the change from building a property portfolio to selling it off and enjoying the spoils of their hard work and sacrifice.
    I reckon they have left the next generation with wisdom :)
    And cashing up and enjoying the $$ sounds like a GREAT plan to me!