Sell or Hold IP?

I have a question regarding my first IP decision i took a few years ago and whether to hold or sell the property. Appreciate any guidance here.

In May 2017, I bought IP in Rooty Hill, Francis road ( 540 SQM, a bit of busy road) for 620K, built granny flat for 130k ( brick inc. Landscaping) so total investment is 750K. Net Yield at the moment is around 4.3% ( gross rent $760)

If I sell it now, I might be able to get $780k so no much capital gains after holding the property for 3 and half years.

Initially I thought to keep it long term and eventually it will pay off itself and can give me passive income. But now feeling like a big amount locked in a single property without much CG.

Thinking of offloading this property and buy 2x IPs for 800K. Is it a good a idea or just wasting money on entry and exit costs.

My long term goal is simple, get out of rat car asap and gain financial independence asap ( maybe 10 years away ). I am around 40 years old.

This is the only IP I have and I am in the market currently to buy the next one.

 

Why do you think those 2x ips will perform better than rooty hill? While costing you 25k to sell and another 30-40k to buy back in.

 

@wylie @Trainee thanks for reply.

I know I might loose around 80k in doing transactions without any guarantee that future IP will perform better.

Let me ask question differently, is a bad buy/ investment decision? If you are in my situation, what would you do.

 

Generally think rooty hill would be a good long term hold. Hasnt been long, you bought at the top and we’ve had an epidemic since. The timing of the buy was bad, but whats done is done. It probably costs you nothing to hold.

the only reason i would sell, in your shoes, is if

1) i thought i have something much better to buy (much, much better),
2) i thought rooty hill had no long term future (and i never think that for any major city) or
3) i need the borrowing capacity for say a ppor upgrade (ie non investment reason).

so if you are thinking sell and buy a house in brisbane or something, there is no guarantee it will perform better than rooty hill.

 

I think you purchased at the peak of the market.

When Property investors do this, they may feel dejected and sell out too soon, incurring loss due to exit and entry costs.

There's no guarantee you'll sell then buy another 2 properties that will give you the gains.

I'd just wait it out.... it will eventually pay off.

Real estate takes patience.

If the Property was in an area with no fundamentals, it would be a different conversation... or if it was in an area with an over supply... but they aren't making any more land these days.

 

This is not simple and clear goal at all! What do you mean, what do you want to achieve from investing into RE, be specific, then define a plan and strategy for it. So what $ amount say gross you need to generate? Then what investing strategy you will use into property?
Like losing weight, I cannot just stay I want to lose weight by Easter, that goal is not specific enough! Ok, that's great, but what weight you want to attain to, say 8 kgs loss by say 1 kg per week, so in 8 weeks.
Then you need to state the plan, less junk, meal plans, exercise 30 minutes x per week, or IMT, etc....
NEED do know the exact numbers and then very SPECIFIC plan on how to do it!
Also start with one investment, monitor the performance, see if it works to your expectations and then repeat.

 

Chopping and changing IPs is rarely a good idea unless you really see little hope of the area doing well and you have identified strong alternatives to place your money in. 9/10 times folks would probably do better just holding.

Re what would I do in your situation, it's impossible to answer. I don't know your income level, amount of equity /cash available, level of commitment and sacrifice, amount of debt and your specific goals. Wanting to retire comfortable at 40 isn't a goal, it's an aspiration probably 20mil people in Oz have, and only a tiny fraction will ever smell.

A goal is wanting to have X amount of equity/CF by X date. So in these 10 years I'll need to take X actions. I have X finance available. I am willing to learn X strategy and execute X over years 1 to 3, then X in years 4 to 6, then X in 7 to 10. Then review progress and adjust.

Then I'll need to make an appointment with X psychiatrist to discuss why I've realised 10 years is more like 20+. Get over the shock with X amount of time, pick myself up with X meds and continue along my path.

The fun part is filling in the Xs.

Enjoy the journey

 

Unless you buy property at the perfect time , ie at the uptick of a boom , you will have to hold for the Long term 7-10 years to get a good capital return. sometimes property does nothing for 3 years then starts to climb. I think your property sounds good, has land content and good yield with granny flat. Be patient and hold. I get impatient too but patience is the key.
Swapping to buy something else is a waste in transaction costs.

 

Also a goal like retirement in 10 years needs to be backed up by some projections, at least.

 

You have got a pretty good yield at the moment, so I would continue to hold.

 

For those of us who have invested into Brisbane.....

 

Yeah sorry ,...my time frame doesn’t apply to every location in Australia. Perth for me went up heaps in 1 year then plummeted, now after 7 years I’m almost break even.

 

I think the busy road is always going to hold back your IP resale value.

Rooty Hill median house values have only risen 13% in last 5 years is it considered a good capital growth area? Areas I have been researching in Newcastle/Central Coast have risen 40% in same period.

Also the granny flat might hold back PPOR buyers who are the majority of your potential buyers.

if I was you I would hit the bullet and sell and rebuy in a better location even with the sell/buy costs. I know it sounds a waste of money but in 20 years you won’t care about the additional costs when your IP is worth over double what you paid this year.

I’d buy 1 x $800k as there aren’t many good CG areas around selling houses for $400K.

good luck!

 

Thanks Shamrock.

Just thinking loud. Yes, its a busy road but close to station, school, novotel hotel etc..maybe in 10 years time, zoning might change and prices might shoot up. Until that time, I continue to enjoy yield? I have borrowing capacity to buy next IP worth 500k. I believe my rooty hill property yield helping me with the borrowing capacity.

As others said, its hard to predict which areas will grow and if I make a wrong decision with re-buy after selling rooty hill, I will be in worst condition.

Maybe its good to keep this property long term and use this for retirement income. Meanwhile, I buy something for 500K and sell it in 10 years time for 1M. With this 500K profit, pay debt on rooty hill IP and enjoy CF?

Good point regarding 20 years but my rooty hill might also appreciate anyway. Sorry, I am not questioning you but sharing my thoughts and making sure that I am not missing anything obvious.

 

@Sackie @MWI sorry for the delayed response. Your comments made me think about where I am heading

I have replied in a separate relevant thread about my retirement strategy/plan here. Appreciate your guidance/thoughts on my plan.