Selling my investment whilst being unemployed?

Hi all,

To cut a long story short i purchased an investment property in Eaglehawk, Victoria a few years ago and it has been under performing. I only have myself to blame, as i was fresh to investing and didn't do enough research, so turns out there is a lot of violence in the area which are driving tenants away, as well as it being a low socioeconomic area. Based on this i am looking at selling the property as quickly as possible.

For the past 8 months i have also been unemployed as i left my job to take career break. I have now started working again as of this week, however are there any advantages / disadvantages of me selling the property whilst only earning a minimal financial income for this financial year? Should i wait until i have worked a full financial year before selling the property, or are there any advantages to selling the property on a low income for the current financial year (considering i have been off for the last 8 months)?

I would appreciate any advice

Thanks.

 

If you have made a taxable profit on sale it is better to sell the asset in the year you did not work. This will means that the tax payable on sale is taxed at lower marginal rates.

 

Before making a final decision determine real numbers

1. How much does it currently cost you each pay period to service ? (Take annual cashflows and annual tax impact (ie extra refund ?) and add all these and then divide by number of pays (26 f/nights). It may be a mistake to sell a property that is treading water perhaps even cashflow positive.

2. How much is the CGT impact ? Perhaps little or none ? Perhaps a bit ? Why trigger tax ? Yes if it occurs in same year as no work thats fine but it could also result in one of those Centrelink letters in the media and a repayment of unemployment benefits. Check.

3. How much cash would you be left with if you sell. Take selling price and deduct all selling costs and the tax estimated. Then deduct the loan payout. What is left should then be yours ? If its trivial and the cashflow impacts are also trivial then why bother ?

If you decide to keep perhaps a change of agent may help - You cant change the area but you can influence tenancy. Get a old lady or a hard working single mum with a decent job who wants a nice home and they will care for it like its theirs.

 

Thanks for the valuable information everyone. I bought the property a few years ago for $288K. I had an appraisal completed on the property and they have stated i could get between $340K - $360K for the property. I understand this is not a huge gain, but it has been a serious struggle with this property.

1) There has been a lot of violence taking place in the street. Just recently a few residents have been assaulted by an aggressive neighbour

2) There is an oversupply in the area and given it has been developing a bad reputation, it is very hard to find tenants. This means i could be sitting weeks on end having to pay the full repayment on the loan which is quite a struggle.

Based on all of these factors, is it worth me selling this property?

 

Unless you think there's going to be a sudden improvement in the area (and from reading what you wrote I doubt it), I would sell. And selling now while you are in a low income year is absolutely perfect.

Then, if you don't need the extra cash to live on, keep that money tucked away ready and be on the lookout for a much better purchase.

If you do need the money to live on, don't chew through it as a sudden windfall!

 

Dear Merc Thunder,
it sounds to me that you have learnt a lot by purchasing this investment property!
Why dont you post us all the things you have learnt?
Make a list.
I am sure you will surprise yourself and every one else here will have the chance to learn too!
I hope this helps

 

This! And you made a little money as well! And you're not going to pay much CGT!!! And you found this forum!!!

Your future is bright.

The Glass is half full.

 

Sounds like you might be relieved to be rid of it. Do you really need to ask the question?

No one can tell. Weigh up the costs of keeping and the costs of selling. How much will be left in your pocket after the sale, after tax? What can you do with that money that might be better than holding the property? Only you can decide what is best for you.