What to do - Lease or sell?

Hi all,

wanting a bit of advice. In 2015 I bought a house with my wife and I've been offered a transfer where work will pay the rent.

Our decision is whether we rent our place out while we have this break, or sell it. As we both will be renting, the 6 year PPOR Capital Gains Tax exemption will apply if we do sell later.

House was purchased for approx $400k and local real estate agents valued it for between $750k - $800k. I've never leased a place before so this would all be a new journey. Rental yeilds in Melbourne are low, but the estimated $450-$500 per week in rent would mean we'd be nuetral geared.

The one thing that makes the decision hard is our neighbour owns the 2 houses next to us and we overlook parkland and a creek. They have approached us several times and the last time they said they're pre approved to buy our house if we were to sell.

I'm leaning towards selling the house, but unsure how I should sell it. Give it to a real estate to run a campaign and put to auction, or avoid agent fees and approach neighbour and ask for their best offer ("If you were to make an offer in the mid $800k, we'd consider not taking it to auction" etc.

House is a 12 year old, 4 4 2 on 500m2 on Henry Drive, Altona Meadows, Melbourne.

Thanks for your time and feel free to move it to a more appropriate sub forum if it suits.

2JZ

 

What will you do with the money if you sell it? Will you ever go back to it?
Do you think the area is still hot and growing in value?
If you're sure you don't need to go back or your money can earn you more if sold then sell.

Your thought process is spot on. I'd approach neighbours first and see what they will offer, I'd also go to council and see what development could be done if he owned all 3 because that will play into what he's probably willing to pay, and you need to know this so you know their play.
Paying the best professional liar/manipulator, also known as a great agent to sell your place would be my choice as the fees would only be about 15k, and I'm sure they could easily get that and more and the bonus is you already have a serious buyer at play.

 

I am not allowed to buy in the place work has sent me as they'd stop paying any form of rental assistance and it removes the big incentive, so for 3 years I won't be buying property. I could buy investment properties elsewhere though. To be honest, the money would probably go into a RAMS 3% savings account, unless I went with another investment option I'm yet to explore.

I really can't see my myself going back to Melbourne, but keeping it for capital growth is an option I'm considering. I think it could keep going up in the short term.

I believe the neighbour won't be planning any sort of large development for the 3 houses any time soon. He and his wife live in one with their 20yo daughter, the 30yo son lives in the house next to them and my house would be for the 20yo to move into. So I am assuming they would leave it as is and pay down mortgage (belive they own the other 2 outright as they've been there for 20 years).

 

I still feel Altona Meadows is undervalued with Altona and Point Cook bordering it. But Laverton is right there too and it is very undervalued, but no where near as nice as AM.

I guess my other question is what is a reasonable figure to have in mind for a very motivated buyer? Add another $100k on top?

 

Check with your work
You may find you cannot sell your house for the firm to continue to claim deductibility.
(We had a tax audit and the deductibility of house we supplied would have been affected if they rented or sold their home)

 

Also factoring in "if" you sold, where would you be wanting to live in 3years time ?
You could buy an investment in the area you want to live in the future.

If an agent appraisal came in at $850,000, I'd take it to the neighbor saying "this is today, if we go to auction it may get into the 900s", then see what they offer.......

 

I wouldn’t sell yet if you think there’s growth left in the suburb. The neighbours are going to be there in 3 years to pay a premium in future.

Meanwhile transaction costs on buying/selling other IPs are high and you would loose the option for 6 year tax free PPOR in any other houses you buy.

Lease it out for a few years till you are ready to buy your next PPOR elsewhere.

-just my opinion, seek professional advice.