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

Banks are saying im basically tapped out to borrow more cash. I have opportunities to invest in other things but i need borrowings. The houses don't cost me too much to hold, but they still cost. And with zero equity at the moment, its hard to envision keeping.

 

I did think about that. Cost is still too high and wouldnt return (by my calculations and market research thus far). But hey, I am no expert. Just have no cash. haha.

 

I bought to hold for a long-term. My strategy was still to continue down the path of buying. Since my borrowing capacity is now non-existent, the risk is to wait another few years, save up more, and then hit the investment path again - but then loose out on other opportunities I currently have now.

I don't feel it is a lemon, just a slow mover (which is fine if I could wait it out). The end risk would be, wait another 8 years, make, let's say, $300k equity and (that's cool). Or, tap out now, loose 20k, but make $150k within 24 months with other opportunities I have. Nothing is guaranteed, but i can control the short-term strategy better than the long-term one, in some respect.

 

Those technical analysis about the stock market is pure rubbish. The way to make money is to buy what you know. A friend of mine is a computer nerd and three years ago AMD released their new Ryzen CPU. He knew the performance was great. He bought a tons of AMD at less than $10 USD. Now it's $90. So yeah stick to things you know well.

 

If it generates income, it may be serving its purpose perfectly. The issue would be if you purchased an income producing property hoping for capital growth, where the disappointment lies.

Perhaps re-calibrate expectations regarding capital growth vs income in terms of what sort of property this is, and then decide if it serves a purpose in your wealth creation journey.

 

If you have ABN number there are at least two low doc lenders you could use, however you will need at least 20% deposit. Your accountant would sign off on this

 

It sounds like you answered your own question

 

I guess for us mere mortals who are not earning gazillions of dollars per month, it is how best to use our serviceability. One needs to ensure not the "number" of properties makes one proud nor buy the next property listed due to fear of losing out. If long-term is a key criteria, then growth potential is extremely important. While we don't have a crystal ball or time tunnel, the fundamentals are well discussed and proven. Stick with the fundamental and give it time, with an eye for properties with flexibility, most people will do all right - over time.

 

@Hardie how are you going?

Are these properties worth a bit more this month than they were earlier in the year?

 

Capital gains aren’t a steady climb up, and I acknowledged that day 1 in my property investing journey by only buying property with yields of 5% and above.

This has helped me comfortably pay off P&I loans without any stress and though there haven’t been much in terms of gains in the last 5 years (~10-15%). I’ve acknowledged I am in for the long haul.

The properties also have upside potential (new Reno, new bathroom)

 

Sorry i've been MIA. Life takes over and priorities shifted with engagement on the forum. Both are for sale still.

Offers at the moment are just less of me breaking even, however they are generating offers which is above the initial purchase price.

My gut is to just get out, wear the loss, and try my hand at something else. It is a love/hate relationship I am having with the idea on what to do however.

 

Thanks for all the comments so far. All have been helpful expanding my mindset.

With Covid belting me around financially, paying for a uni degree and also instability in my current employment, I am now heavily leaning to just get out while I can. The stress of uncertainty is getting to me a little and I just want to unclutter my finances to be a semi 'free agent' again.

 

peace of mind is vastly underrated

 

Yes this is so important. Better to have 3 properties going up by $50k a year each, than bragging rights of 20 slums going up by $0

 

I couldn't agree more. I was actually talking about this to a friend of mine yesterday. I am really coming to peace with my decision. Not looking forward to see some new debt roll in, but am looking forward to a new chapter.

 

If there has been some upheaval with your job are you sure you still qualify to take on the same or more debt once sold?
Is there a happy medium where you just sell one and hold the other to free up money to deploy into something else?
What is the something else ? With risk comes reward (sometimes) so you might be jumping into a nice safe asset with better CG profile or you might be considering buying a boarding house (heaven forbid)

 

Totally agree but I have come to the conclusion that one only achieves true peace of mind when one is dead .

I have been financially independent and retired for 10+ years now. In that time:

1. The buyers of my business went belly-up owing me $42,000+ (will never see any of this) and I was still a rental guarantor for one of the offices (luckily the bank went after them, not me).
2. The wife was diagnosed with breast cancer.
3. The wife had a big chuck of her colon removed due to the side effects of chemo.
4. Our PPOR took 32+ months to sell - two different REAs and two sales campaigns.
5. My mother died from pancreatic cancer and I was one of the Executors of her Estate.
6. MIL passed away totally unexpectedly.
7. COVID-19
8. ...

We all want to live a full life but I have found that incurs risk, brings stress, ...

I believe it is far better to build resilience, to identify good stress (things that are worth stressing about), to develop techniques to process this stress, ... than hope/aim for stress-free live and have peace of mind.

Being the young age of 64, I am hoping/aiming to delay my peace of mind for another 40+ years .

 

Yes, this is very important. Perspective on life is more important than what actually happened to life. Easier to say than do though.

 

If the investment thesis has changed or new information has come to light then selling may be the best move, especially if other opportunities are presenting themselves.

Holding on purely in the hope of an eventual capital gain is idiotic as it ignores opportunity cost, which in your case sounds like a potentially large cost.

If I were you I'd sell based on the info you mention.