Selling an IP with tenants vs moving back in to sell it?

Discussion in 'Investment Strategy' started by Bris Jay, 13th Nov, 2016.

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  1. Bris Jay

    Bris Jay Well-Known Member

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    I recently moved out of my former PPOR and into a renovator in Mount Gravatt East. My former PPOR has tenants that are paying good rent but I don't owe much on the property and it's a terrible tax deduction. I'm looking to develop a splitter as my next project and live in one of the houses which will allow me to rejig my finances and owe money on second house (IP).

    To do this I will sell my old PPOR and free up my cash.

    The property is 39 Collett Street, Eight Mile Plains, Qld 4113 - View Sold History & Research Property Values - realestate.com.au

    I've had bank valuations between $630k & $680k. I think these are extremely low considering it's currently tenanted for $650/wk and there's absolutely nothing in the area selling in the $600's that are close to the size and quality.

    Am I better off selling this with tenants to an investor looking for a % return based on the current rent or moving back in and looking to sell to an owner occupier?
     
  2. thatbum

    thatbum Well-Known Member

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    Why would you sell it with tenants inside and limit your potential buyers to just investors? Plus the hassle of trying to run a sales campaign with tenants living there...
     
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  3. Arcticfire

    Arcticfire Well-Known Member

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    My agent has told me that trying to sell a property with a tenant in place can reduce the final sale price by as much as 10% - that was for a property in inner west Sydney though - so 10% is a lot of money !
     
  4. Bris Jay

    Bris Jay Well-Known Member

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    I've never sold a house with tenants so I guess I don't know how painful it can be. I was 90% leaning towards moving back in but just wanted confirmation that it was the right choice.
     
  5. dabbler

    dabbler Well-Known Member

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    You could always try with them in it, tenants will probably fly the coup anyway, depends on who is buying ATM, my sense is the influx of Syd investors has halted, so it may not be a good time as an investment...
     
  6. The Y-man

    The Y-man Moderator Staff Member

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    We just sold a prop with tenants - agree there are several issues:
    - access (outside of organised inspection times)
    - cleanliness
    - buyers wanting vacant possession

    The Y-man
     
  7. PatsyStone

    PatsyStone Well-Known Member

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    If I had the choice .
    I would never sell a property with tenants in it.
    Most tenants dislike living in a property that is on the market.
    They can make it difficult.
    You can't stage it the way you need to.
    You can't keep it neat , clean and presentable .
    Your agent cannot be as flexible.
    Cheers
     
  8. Bris Jay

    Bris Jay Well-Known Member

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    Yeah, I figure that there will be challenges. I didn't know if the property is more attractive to an investor with tenants already in place. The average yield in the area on RE.com is 3.6% so it would present a higher return than average...

    I guess it's no big deal for an investor to put tenants in themselves.
     
  9. Propin

    Propin Well-Known Member

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    Definitely move in if you can. I'm sure you'll care more about the presentation than your tenant. I sold a tenanted place with a very neat tenant. Amazing how spitefully messy it was presented for home opens.
     
  10. highlighter

    highlighter Well-Known Member

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    It might be worth talking to the tenants. You never know, they may be interested in buying. I can only speak from limited personal experience, but if the place I lived in was up for sale, I'd buy it in a heartbeat. Like many millenials and first home buyers I've saved a hefty deposit, and am just waiting in the wings till a good deal comes along.
     
  11. Ross Forrester

    Ross Forrester Well-Known Member

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    It's a pity you did not use an offset account for your old home. You could have take the cash out of the offset and then reset the interest deductions on what is now a rental property making it tax deductible.

    Their is an article here on what I am talking about by Terry_w - I do not know how to link it sadly.

    Anyway. Maybe sit down with a good person and get an overview on how to plan your goals overall.
     
  12. Bris Jay

    Bris Jay Well-Known Member

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    I built that house when I was 22 and I've been paying P&I since then. It wasn't really something that I was considering at the time. Now I'll always try to have my free cash sitting in an offset on my PPOR.
     
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  13. chylld

    chylld Well-Known Member

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    You don't have to move back in, you can just give your tenants notice to vacate then clean/stage the property once they're gone.
     

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