Selling 2 of my IP's - looks like a loss is coming

Hi all,

Interested to hear thoughts from the community.

I have two IP's (houses)
- Ipswitch
- Toowoomba

Both are currently up for sale given they each have very slow capital growth and they have been a bit of a pain ever since on boarding (bad PM's, constant repairs - nothing major, but still).

My borrowing capacity is also hindered which is restricting me to try other projects (flipping, business investments, more IP's etc) so the logical decision for me is to wear the loss on these (which looks to be about 25k combined), suck it up, and move on. Since I am only 4 years into my 10 year growth cycle on them, it is a damn shame however my general thought process is to get out early, wear the loss, but then have the freedom to try new things, or reinvest in IP's which are a more solid, viable investments.

I did toss up keeping both and waiting it out but I simply cant make sense to it given that I want to try other things. If only I have the CG in both right?

Any one else ever been in a similar position?

 

Unlucky. Hopefully better luck is on your side for the next purchase. I couldn't imagine copping a loss on any of my properties.

 

If you have something else to use the borrowing capacity on and believe that will have better returns than these houses, than selling makes sense.

Imagine this was 2010 in Perth or Brisbane units. Sometimes selling is the right decision.

 

I feel I can make better returns doing something else - even if it is with other IP's.

I had taken a bit of a break from the investment game for a few years (building a business offshore), but I am now slowly catching up on the market again.

Probably going to take me a good month just to catch up on all the latest and greatest info on here. haha.

I am thankful the QLD market in some areas is still holding - even with minimum growth.

 

It's a tough pill to swallow I can assure you. However I look at the horizon and I much rather lose the cash now, than miss out on opportunities in future because I help out for a minimal gain.

 

I know how you feel.

We bought our first IP in 1992 for $125,000. Eight years later in 2000, we had achieved ZERO growth.

Our accountant (at the time) told us that we had bought a lemon and advised us to sell it. We were too busy and never got around to it.

Roll the clock forward another 20 years. We still own that property and today it would be valued between $625,000 and $650,000.

If we did what our then accountant suggested, we would have missed on $500,000 growth. That is on average $500 every week for the last 20 years.

Morale of my story:- capital growth is never in a straight line.

We own an IP in Toowoomba, We bought it 2017. It hasn’t moved in value in the last 3 years but I believe that change in the coming years after we do a reno on it, modernise it, etc.

 

That's a great success story - if only I had one similar.

I have thought about this as well. And to be honest, if i could afford to keep them both I would, my primary driver for selling is that my borrowing capacity is maxed out as it stands today.

In recent times my headspace has changed to be willing to take more risk, so in order to do that (and go reasonably large), I need to free up as much debt from myself as possible - to help with the wider reach.

My place in Toowoomba is also in a need of a reno. It's a solid property. Just old.

 

You missed the point of my post .

You have only given them four years.

I gave mine eight years and achieved zero growth.

And you call my experience a success story?

Growth came after the 8 years .

 

Yep I got what you were saying. My point was, you achieved growth. Regardless of how long it took, you still achieved it.

I don't mind if I make $1 or $10. Turning a profit in whichever scenario is still a win in my book.

 

My point is that you haven’t given it enough time.

After buying and selling costs, expecting property to make you a profit in 4 years is unrealistic IMHO.

But it is your call.

How will feel if you take a loss and your buyer makes a serious gain over the next 4 to 6 years (my selling timeframe)?

But, as I said, it is your call.

 

Yup brought my unit in Brisbane for $350k in 2007 Today it is worth $360k so I sell it it would be a loss

 

SE Qld has been a slow slog the last few years that’s for sure. Ipswich money can be made but it’s more Old Kent Road than Mayfair.

But those properties wouldn’t be costing much to hold. Reno and valuation maybe?

 

Ipswich where? I don`t see any issue with the 2 locations. If you bought well you would just need to wait. Real Estate is a long term game. Are you sure that if you sell you are going to achieve better results with the money left over?

 

I have a BIL who bought a house in Dubbo a number of years ago. They lived in it for 18 months to 2 years and then sold it ...

... for a $40,000 loss .

I couldn’t believe they did that:- firstly buying the place as they knew their stay was temporary (probably should have rented) and then selling it after such a short time (probably should have rented it out).

 

Not many people out there are investors a/o crunch the numbers before making financial decisions. What`s clear to us on this forum is often ignored or not accepted by the majority

 

If people don’t crunch the numbers (including risk analysis) before they make financial decisions (especially large ones) then they don’t fit my definition of “investors”.

To me, that would be like driving a car with one’s eyes closed. Bloody dangerous and could be fatal.

 

Have you thought about doing a renovation on the Toowoomba property and giving it great appeal to sell to an owner occ? Might avoid the loss?

 

I think Kierank is spot on. I don't know about the quality of your assets and if they are lemons - may be they are, maybe they are not. But when you bought 4 years ago, surely your horizon was longer than 4 years? Can I ask how long did you aim to hold the properties when you bought then originally, and is it right to change your strategy now?

I would just echo everything that Kierank has said, but add one thing: part of the discipline of buy-and-hold real estate investing is resisting the urge to tinker with it.

Let it mature, let it marinate.

As I have said in other articles, the magic of real estate happens in the second 10 year period that you hold it.

Four years isn't even half a property cycle.

Up to you though.

 

Yep time in resolves most issues as those areas aren't mining towns and have ok fundamentals. In the me an time with a bit of extra research and a reno an ugly duckling can be transformed into a solid performer. For instance if 4 beds are in demand turning a 3xbedroom into a 4 bedroom 2 bathroom for $25-30k can add $100+ per week in rent allowing you to manufacture equity as well as through annual debt reduction.