Sell the apartment or not?

Hi Everyone,

Newbie here . I came across this site while looking for solution for my situation. I understand I should talk to my bank which I will do next week, however in the meantime I need some advices to help me think further.

We bought 1 bedroom apartment off the plan in 2012 for 392k in Melbourne CBD. It's high rise and we purchased higher floor, settled in June 2014 and we moved in. Claimed 20k FHOG as well for this property.

Fast forward to 2017, we have 268k owing in this apartment @3.99 % P+I loan, and planning to buy PPOR for around 500-600k.

Now the problem is the deposit. We have deposit in total around 40k. I understand we will have to pay LMI.

Should we sell the apartment, but the price can be quite low but it will give us more for the deposit.
Or should we keep it as IP and wait a little bit more? The rent can be from 400-420 pw. Is there any way to use the amount we have put in the current mortgage to help with the purchase of the new PPOR?
Can stamp duty be capitalised into the loan?

Thank you in advance.

 

Yeah unfortunately the 40k deposit is including the offset we have
I checked my online bank account it says 24k equity in the property but I think it's not something we could use as additional deposit since I'm pretty sure the valuation will be lower than our purchase price.

 

Of courze you need to speak with your bank but 268k doesnt sound like alot to me. 268 plus 600k is only 868k. So from what i see its what income do you and your wife have currently. If you both earn 120k each its one outcome. 120k juzt u is another. A good broker could help if you earn a good income.

 

@The Y-man I can only find data from 2015.. One sold for 347k another for 360k. I think the 347k is maybe closer to what we are going to get. I can see 1 unit being put up for sale for 330k+
Body corp is 2600 per year.

@penfold25 my income is 77k and my husband has his own business split 50-50 with his partner, last year his taxable income is 40k.

 

Well as you know business is looked upon badly by banks as you know. Is it possible his partner could handle some of the biz for 1yr and he goes work in a full time job that could earn 80 to 90k or more? Im not sure what others would suggest but thats what i would suggest. Also if you could get a higher paying job that would help to. Also you could move into parents and rent out apartment for 20k cash in a year. Hope that helps. You have lots of options.

 

Thanks for your reply @penfold25 . He probably won't go that path (looking for a full time job). He did that before, tried to work on the business while doing full time job - and he was made redundant, and almost lost the clients. They have now established a good clients base just need to expand further. Moving into parents place is not an option too, unfortunately.

We are just looking for landed property (house/townhouse) 2 bedrooms and 1 bathroom (plus 1 toilet for guest). So I'm hoping we can buy at below 600k. But I'm trying to avoid shady suburbs that's why the budget is in the 500-600k range. So hopefully we can keep the "make or break" decision based on what we do to this apartment.

 

Can you live there for another year or two, save madly and put the money into an offset account? This will increase your deposit and also give you a better chance of holding on to the unit as an IP.
Marg

 

Fair enough. Speak to a broker or go contact 2nd tier lenders eg liberty. The 2nd tier lenders will more likely consider it and be more lenient than the big banks as you dont want to waste your time on them. You can always refi when your situation improves.

 

@Marg4000 we did that the last 2 years and want to try our luck, see if we can purchase a PPOR this year. If possible we really want to avoid putting it on hold further. We love this 1 bedroom apartment, so convenient and close to everything, but we think it is time to move on

 

@penfold25 never of liberty before but seems to be popular! Thank you.

@The Y-man any other recommendation? I remember there was a good one from Somersoft called Rolf but I don't know if he's still working as a mortgage broker in Melbourne.

I tried to look for the free property reports from ANZ and domain.com.au both of them only have samples of sold 1 bedroom apartments with carpark for around 380k.

 

Thank you

 

If I were you, I would sell the 1 bedroom apartment.

The reason being

1) high rise apartment with multiple units in the same building, capital growth and rent are dictated by other similar units in the same building, no competitive advantage in price or location. This means it will be very restricted growth and rent in the future.

2) time, we are getting older. If there is something can be changed in term of property investment, better change earlier than later. so the wealth accumulation will be smoother as we are getting older.

3) the interest incurred in buying PPOR will not be tax deductible. Hence I would trying to pay as less interest as possible when it comes to buying PPOR. ( obviously, there is loan structure vs tax effectiveness need to taking into consideration)

Above are just my opinion, if I were in your situation. Hope it helps

 

@wylie, the OP is in Melbourne. Which people are saying there's an oversupply.