To Sell or Keep 1st Investment

Hi All
Would appreciate your thoughts on daughters 1st Investment property its in Barnsley (20 min from Newcastle 10 min from the freeway. Bought in late 2013 hardiplank tile 3 bedroom (2 of these bedrooms are small) the only bathroom is renovated but the previous owners made bathroom and toilet into one room. Purchased for $325,000 have tried twice to pull out equity couldn't get past $357,000.
2 weeks ago tenants moved out we have just finished a $3000 Reno looks updated had a new valuation done and it's come back at $390,000.
Should this be the time I sell and put the money to a better property.
Keeping this property is not holding me back I'm just not sure whether to keep as it has no potential to do more. The land was originally part of a bigger block of land so the shape is like a triangle, the small bedrooms and one toilet can be seen as a downfall. If I sold would receive around early $400,000 as a sale price
SELL OR KEEP
THANKS FOR YOUR THOUGHTS
Lorraine

 

Have you considered the selling costs + capital gains tax + re-entry costs to essentially swap it for a better property?

Why not draw the equity and buy another one as well?

How's it rent?

 

It's increased 20% in value in less than 3 years, I'm not sure why you don't think it's a decent property? What's the weekly rent?

I don't see the point in selling after 3 years personally.
Why pay agent fees, legals and stamp duty again without increasing your asset base if you don't have to?

 

If it gets rented it will be approximately $420 per week
I was just thinking that sometimes a property has gone up and that you should realise the gain pull out the cash and get into a better property bigger rooms less upkeep etc
Worried that if it's a hot market now might miss the good prices, where in the near future I may not get as much

 

Realise the gain by pulling out equity and purchasing another. You're also probably CF+ so don't see a reason to sell at all.

 

I guess it depends on your strategy and personal circumstances. Unless its costing too much money or the funds are used to pay down other debt, the property is a dud or it is stopping further investing I essentially prefer to hold really long term.

Then time really makes a difference, rents keep rising as does overall CG.

 

The area is not bad at all i suppose now the house is looking updated fresh etc fixed up the mess from the tenants all was good to go.
I had a new PM come through she thought the house was great also noted that bedrooms were small said that it was good that there was an extra living area
Started thinking should I put the money to a better property

 

Hold onto it. New shopping precinct in the pipeline not far from there. $420 is great rent and sounds like it's positive for you.

 

You already extracted 60k in 3 years.
I think investors want to find such deals.

But at the peak, you are probably thinking right. Though, you need to factor in the selling costs. Figure out how much will you be left with. Would that amount be sufficient for you to enter somewhere?


Regards

 

Hold and pull out equity. Buy a second property with the equity. Rinse and repeat. Only if you thought if the property had little or no more growth potential would I sell.

Can you see it possibly being worth 500k or more sometime in the next say 3-5 years? If yes, definitely hold.

 

pull out the equity, keep the asset and buy another = two properties working for you. Unless you see no potentional further capital growth in the timeframe you require. I have sold a property i believed had peaked only to ensure i bought well with the next in a growth market. Depends on what you want to do.

 

I love how majority of the posts here are all the same - hold, extract equity, and use to buy the next one. Thats all well and good, and in a perfect world is the better option, however OP has probably realised their borrowing capacity is limited by holding onto this existing property/liability.

I'm actually in a very similar position to the OP. Looking to buy new OO, not exactly looking to move back into this particular property which is a unit, so unsure whether to follow "perfect world" route and to keep existing, buy new one with assistance of equity. Even if equity is present as such in the OP case, that only satisfies the security side, what about the servicing side?

OP - I think if your income is there, you should definitely look to extract equity, purchase additional property, and aim to keep current place too. However if your income is tight, and does not allow for additional property/liability, to maximise servicing, you may want to look into a "security substiution", this is where your existing loan remains the same, but just swap current place to new purchase as security. With the increased weightings on lending this might help you out. Of course, all dependent on your income figures!

 

Agreed, but we can only make a suggestion on the information provided. The OP said it wouldn't hold them back. There was no mention of ppor.

 

Keep.
Only bought in 2013.
As others mentioned after factoring buy and sell costs not much CG.
Typically some say 5 years is a minimum period for holding.. I don't agree.

We are at the top of the cycle now, so I don't think selling and getting back into the market elsewhere will benefit her much.

If she wishes to offload it my advice would be to wait until the mid/peak of the NEXT cycle in Syd/Newcastle...

 

Considering the comments that have been written in response to your question it seems the consensus is to hold. If financially you are able to keep this property even if it has levelled off, I would suggest retaining it as the figures are adding up to a great return. With the experienced growth perhaps utilise the equity gained to look for another property, paying special attention to the perceived return so as a second wont hobble performance. Nothing local, look further afield, it’s a big country afterall.

 

My philosophy is to take profit than take hope. A few questions I ask myself when I re-evaluate an IP.
1. Has the market peaked and do you see potential for much growth in the next 5 years. If you think it'll only grow by 10% in the next 5 years then time to dump it.
2. Is it costing too much? Not just in terms of money but also further borrowing? If so, dump it.
3. If you said Yes to both 1) and 2) then I say you are taking hope rather than profit.
4. None of the above matters if you can't sell and break-even or preferably with a decent profit.
5. If you can get decent equity but the property stays flat or goes under in future then what you essentially did was pay more money(on the dud) to be able to continue your investment journey. Which also has its place.

Don't take above as advice but rather as food for thought.