Hi Everyone, I am so glad to have found this Forum and wish had found it earlier. Being fairly new to Australia and in full-time employment, I am all ears to all your advice, suggestions etc as I embark on my property journey. My job brought me here 6 years ago and I love the country, her people and everything else it has to offer. This is now my home and I will live and die for it. Back in 2013, I bought a piece of land and have built my PPR in a highly sought after area in south-western Sydney. I have a reasonable size mortgage on it, however, a recent valuation showed that it has grown in capital value by $200K. I have since used the equity and some of my savings to buy a 3-bedroom unit in Sydney and another 1 bedroom unit in Gold Coast. But before all this, in 2012 I got talked into buying a 4-bedroom single-storey 3-year old house in Gympie, QLD. Whatever figures I was given for its potential capital growth has not materialized and I think I bought it at above market price then. While its always tenanted, the advice that I am getting is that it will prove to be a road block for future borrowings and acquiring more properties. I listed it for sale but the offer is less than what the current mortgage is on the property. I am humbly seeking the views of you all learned people and property experts as to what should I do? Hang on to the property or take a massive hit to the tune of about $80K and get rid of it? Looking forward to your views and suggestion. Kind Regards. OnTheMove.
Hi @OnTheMove Welcome to PC! What is the opportunity cost of holding on to the Gympie property? Do you have the $80k to pay for the shortfall? What is the cash flow like of this property? It may be tenanted, but is it costing money to hold year on year? If you do sell it, how much does it increase your borrowing power by? and does it improve it enough to help you buy something with potential for capital growth? A fair few questions there! It may be challenging making a call on this - but if it gets you to your goal quicker, and you have the resources, and potential (or lack there of) with this property, it may be worth considering your options.
Hi Monalisa, Thanks for the welcome. Great to be here! The property as is with the current rent is looking after itself for now since it is on IO payment. Once the IO period is over, I believe there will be a shortfall of $500 thereabouts on monthly payment. The extras like rates, insurance etc that I pay for out of pocket offsets my tax and gets refunded at the end of FY. So it is basically neutral for now with IO payments. When I say take a hit of about $80K, I meant that I spent close to $60K as initial deposit, brokerage fees and other purchasing costs, add that to the $10K less than the current loan I am being offered and another $10K for agents fees etc. The actual amount that I will have to spend from my pocket at this stage is about $20K to get rid of the property. I don't know by how much will it increase my borrowing capacity at this stage. And after selling it, I certainly don't have enough funds at my disposal to immediately buy another IP. Any further suggestions? Thanks in advance.
Do you have a depreciation schedule? The property is only 3 years old so this should help with cashflow. As you are in full-time employment, also consider putting in a Pay As You Go Variation each year. Will allow you to recoup any tax savings early to increase your offset account. Best to put the extra funds into an offset account for your PPOR.
When does the interest only period run out? Even if you can't purchase an IP immediately, if you will have to pay an additional $500 per month you just have to do a cost vs benefit analysis of keeping this deal. Does the location have the fundamentals, and do you expect that these will impact the capital growth for the better?
Talk to one of the brokers on the forum to check whether you can actually borrow more , or maybe put some figures on another post and they'll be able to give you an idea on how much you can borrow and whether selling would help . With the changes in lending criteria the only things we been able to buy have via mortgage substitution of cash purchases in our super , but we do have a few properties and total borrowings at the moment that give me an occasional sleepless night .... If you look at the stats for Gympie on sqm research , its travelling a lot better than a lot of the regional q'ld towns in terms of low vacancy rates ( 1 % ) and prices aren't falling out of the sky like Gladstone , Townsville and Mackay , but I wouldn't expect much growth until after Brisbane moves a lot and that only just starting . Cliff
The IO period runs out in Nov 2018. While I am not too up to date with all the developments in the Gympie area, I have been reading that the completion of Bruce HWY has shortened travel time to Brizzy and is attracting investors and retirees to the area. But the downturn of the mining industry is a worry as Gympie has always been driven by mining. So really can't say what the property market is going to do in the long term. But for the moment it certainly is not doing much.
Thanks Wonbat777. Yes, I do have a Depreciation Schedule and the accountants have a copy of it.. Your PAYG variation advice is noted and I will have a chat with my accountants about it. I do have an offset account against my PPOR in which my salary goes.
Thanks so much Cliff. Much appreciated. Yes, that's the feeling I am getting that Gympie is not doing too badly in comparison to other regional towns but the capital growth for my property is on the negative based on the offers I am getting and is purportedly proving to be a road block to my property journey. Certainly I have not had a tenant issue since I bought.the IP in 2013. I will post some figures soon and hopefully a broker replies re my borrowing capacity with and without this property.
You can refinance to another lender and reset the IO for another 5 years or better still see if your current lender will extend IO another 5 years. Dont let it go to P&I before asking for a 5 year IO extension as with some lenders this will trigger a full application as opposed to a 2 page tick and flick form so keeps any servuceablity assesments being done. Get a forum broker to run the numbers as there may be options and strategies you are unaware of.
