Join Australia's most dynamic and respected property investment community

Would you sell your PPOR if it would ease dire financial pressure?

Discussion in 'General Property Chat' started by The Y-man, 14th Aug, 2015.

?

Would you sell your PPOR if it would ease dire financial pressure or will you hang on?

  1. Yes - sell as quickly as possible

    27 vote(s)
    32.9%
  2. No - hang on for dear life, sell off everything else, find some way to keep it

    19 vote(s)
    23.2%
  3. Not sure until put in that situation

    27 vote(s)
    32.9%
  4. Been there, done (or didn't do) that................

    9 vote(s)
    11.0%
  1. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    901
    Location:
    Melbourne
    I've always stated that the PPOR is a lifestyle choice when buying, but it is also for most the family space, the place of many memories, the reward of many years of hard work and a symbol of their success.

    In recent times, there have been situations we read about - both here and elsewhere - of people coming under pressure to sell the PPOR due to (changes in) financial situations. I am reading how desperately they hang onto the home, even if it will save them financially if they sold it, and potentially look for ways to get them into even bigger issues further on.

    A thought struck me that perhaps I am the odd one out? :confused: I would (like to think that I would) sell the PPOR and "downgrade" quite quickly, assuming it would rescue us financially (by releasing equity and/or stopping loan payments). Don't get me wrong - I don't live in a dump; until the latest IP purchase, it has been the single most expensive property bought by us to date - and today, its value still exceeds every other property we own. Maybe I don't feel the sense "achievement" of hard work on it - because we bought the PPOR deep into our investing journey (about the 9th property we bought) when we could afford it comfortably (without having to slave out guts out for it). In fact, we have spent more hours of hard labour (both generating income and doing reno work), mental anguish, and tough times on our IP's than we ever have on our PPOR (really must get around to sprucing it up some stage.....meh, when we need to sell it I guess! :p).

    Perhaps it is also that we are too busy to look after the PPOR - only last weekend, our poor neighbour was complaining how they had to mow our nature strip for us (happens often when our garden gets real bad) because we are never around in daylight. Having a huge house is fantastic as a concept, until you figure out it has to be cleaned, maintained, and ultimately used (no point paying a cleaner to keep it pristine, if the room never gets touched IMHO).

    We don't (have time to) entertain a lot of guests at home either (other than the fact it's a bit of a mess, and we're a bit busy all the time) - despite the fact that we are fully decked out built-in 4 burner BBQ under a massive under cover patio and open fireplace. I wonder if for many, where friends and family have seen your home often, if you suddenly moved to a small apartment, there would be "talk".

    So - a quick poll out of curiosity to see if I am alone in my thinking and getting other perspectives on this!

    The Y-man
     
  2. Big Will

    Big Will Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,546
    Location:
    Melbourne, Australia
    I wouldn't know till I got there but I would sell others before the PPOR as the emotional value + the gossip that I think would come with downgrading.

    If push came to shove I would sell and downgrade.

    Reason I would hold onto the PPOR more than an IP is I am the best tenant (in my eyes).
     
  3. Vasa

    Vasa Member

    Joined:
    31st Jul, 2015
    Posts:
    17
    Location:
    Sydney
    I would definitely sell my PPOR and would do so even if not under financial stress. I live in the Eastern Suburbs of Sydney and can rent a similar house for about 3% and invest elsewhere to get 5% or more.

    Having said all that I personally think the Eastern Suburbs has plenty of growth left in it as it hasn't seen the same level of growth as the Hills District has. I hope all the people selling properties in the Hills area at huge profits will turn around and look to move to the Eastern Suburbs.

    Also, my wife won't let me.
     
    Esh likes this.
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,760
    Location:
    Perth WA
    We've rented most of our life and are living in our own home now - I often joke to my husband that I think I'm a renter deep down - I'm much more content when I know I can't change things!!

    I'd have no problem at all putting tenants in our home and renting again. That said, we haven't renovated yet - once it's finished it may be a different story.
     
  5. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,097
    Location:
    Melbourne, Nationwide
    There might be more merit over the long term in selling an IP rather than your PPOR. Eventually you'd want to buy back in, leaving you with more non-deductible debt if you want to buy your own home again in the future.

    The best solution of course is to not sell anything. We've seen some tough times financially and selling any one of our properties would have made life a lot easier at the time. Instead we set strict budgets, made a few sacrifices and eventually we came through it.

    As a result, today our net worth is better as is our cash flow, simply because we've got one extra property. Selling under adverse circumstances can be a short term fix at the expense of long term gain.

    The biggest problem with people getting into financial trouble is they often don't recognise it early enough and they delay implementing a solution or asking for help. The longer you leave these things, the deeper the hole you have to dig yourself out of.
     
    legallyblonde likes this.
  6. Chilliblue

    Chilliblue Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,578
    Location:
    Australia
    In our family we never gamble the family home so our investing strategy ensures that we would never need to.
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,552
    Location:
    Sydney or NSW or Australia
    Geez. I live in a hovel zoned R4. No land tax or cgt issues to worry about.

    No problem selling to bail us out and upgrade at the same time. (Provided it was still a strong developersmarket). ;)
     
  8. Bayview

    Bayview Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    2,716
    Location:
    Mornington Peninsula
    Just did it.

    Bought a business 6 years ago using equity in the PPoR, the business has been going downhill ever since Year 2, and resulted in us having to sell the PPoR a couple of months ago.

    Have had to sell off all the IP's (except one) along the way; looked at selling the business too, but the loan remaining after a firesale sell would have left us with no income for me and an unserviceable remaining debt.

    Hoped to trade our way out and cut costs and staff as we went in the hope, but no bananas.

    So, held on as long as possible, but with nervous breakdown looming for wife and I; gave up and sold.

    Still got the business, which is now debt free and still provides and income for me, still got the IP, and no debt at all for the moment and a bit of cash from the sale..

    Will now rent for a couple of years, put a bit of the cash into another project we have in the pipeline, and get back to having a lifestyle of sorts.
     
    TheGreenLeaf, MTR and Leo2413 like this.
  9. juzzy

    juzzy Well-Known Member

    Joined:
    14th Aug, 2015
    Posts:
    156
    Location:
    Melbourne
    I would see if my parents or my future in-laws would let us stay there for a while and rent out or place.

    It would suck, but if we could ride out a tough period and keep our properties, it would be worth it.
     
    freyja and legallyblonde like this.
  10. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,516
    Location:
    Sydney
    I would not have a problem selling the PPOR, hardly use any of the features anyway...
    It's an unnecessary luxury for us.
     
    Esh likes this.
  11. Inov8ive

    Inov8ive Well-Known Member

    Joined:
    17th Jul, 2015
    Posts:
    484
    Location:
    Sydney
    I might be a little bit different to most of you. I live in a beautiful part of Sydney in a house worth approximately 1.5mill- But its rented! We have about 2.5mill worth of IP's and if things got tough, we could just leave our rental- although we have pretty good cash reserves before the need for that. The reason that we like renting is because our rental payments are only $770 per week (still pretty high i guess), where as the mortgage on our place would be a hell of a lot more if we wanted to stay in the same place. Not having a PPOR also enables us to keep investing more easily. We can also up and leave anytime we want, we can move into better zones for our kid's schooling when we get to that stage. Renting works great for us.
     
    MTR likes this.
  12. wombat777

    wombat777 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,418
    Location:
    33°41'24.7"S 150°55'34.3"E
    Hopefully I can avoid that situation. I am in the process of signing up for income protection insurance. I also have buffers in place equivalent to approx 1/3 of my gross salary. If I lost my job I would get a redundancy package equivalent to 12 months pay.
     
  13. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    4,903
    Location:
    Sydney
    I'm thinking I'd like to sell the PPOR so I can free up my cash for multiple other investments. (Or put a duplex on the land). My house is worth heaps now (~1.4mill, there's 1.3mill of equity there) and I'm sure I could use my share of the equity elsewhere. Sure it may continue to go up, but i'd be happy to get the current price and reinvest in a few other investments (if borrowing is still possible :))

    But the partner won't me let, and doesn't want to build a duplex on the block either. :(. I could easily live in a place for very (relatively) low rent or move into my latest purchase, which cost less than half a mill, or live in half of the proposed duplex pair. All these solutions are fine by me. :)

    But.... if it would be a forced sale (need to raise money) generally speaking I'd sell an IP first to relieve the pressure. Its just the current conditions are great to sell the PPOR.
     
    Esh likes this.
  14. Ben Wilkie

    Ben Wilkie Member

    Joined:
    18th Jun, 2015
    Posts:
    15
    Location:
    Western Australia
    As I am using a debt reduction stratergy with my investing (paying down non deductible debt borrowing out as deductible debt) against my ppor I'm more than happy to sell my home to pay down debts if need be.
     
  15. JenW

    JenW Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    365
    Location:
    Perth, WA
    If we had to, we'd sell up. It's not so much the sentimental things for us, more things like we would really miss next door's cat, and we loathe packing and moving stuff.
     
    legallyblonde likes this.
  16. Nemo

    Nemo Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    265
    Location:
    Somewhere
    Only if I was down to my last million.
     
    chylld, Ben Wilkie, OC1 and 1 other person like this.
  17. legallyblonde

    legallyblonde Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    685
    Location:
    TAS
    It would have to be an amazing PPOR (context: I don't have one) for me to put up with that much stress to keep it! Dream home: Sure I would fight for it. But if it is just a house I really enjoy living in then it would be gone ASAP. Better to sell sooner and have less stress, than barely keep your head above water and have to sell at short notice.
     
  18. The Butler

    The Butler Well-Known Member

    Joined:
    24th Jul, 2015
    Posts:
    69
    Location:
    Sydney
    We hit hard times back in 2010 and wanted to sell the acreage PPOR to relieve pressure. It was bought in 2004 (pre SS lurking) as a PPOR (not for investment purposes) and we knew that we would take a hit due to the GFC. We got a val that came in at 25% less than purchase price and lowball offers coming in at 33% discount.

    We decided that we would do whatever we had to do to not sell and wait for a rebound. Now a full five years later we have repaired the balance sheet, cleared all debt, have a decent cash buffer and no longer need to sell.

    But we have learned from our experience that a) higher priced properties can get slammed in downturns b) niche properties can take along time to sell even in a good market c) when we wish to sell in the future may not coincide with a good sellers market d) whilst it was not bought as an investment - any future PPOR will take in likely CG and possible yield if it is necessary to rent out in a personal downturn. e) whilst the property was lovely we didn't use all the features and the maintenance on unused areas bugged me.

    We have just sold the property for 25% more than purchase price. After stamps, renos, and selling cost we haven't made a cent.

    We are now renting another acreage down the road for a rental that represents a 2.89% gross yield for the owner based on its last sale price in 2011. Gardening and pool maintenance is included.
    We SWAN and are looking to place the freed up cash into a more diversified pool of investments and to hopefully grow the money for retirement in approx. 10 yrs when the kids leave school.

    I'm sure people gossip about the reason for the sale. Truth is we didn't sell when we needed to but have now sold when we don't need to . Stuff'em - let'em gossip.

    We are looking to purchase a PPR for around 33% of the sale price of our PPOR, but the market in our area has gone mad lately so we will continue to rent for now - waiting for Sash's predictions to come true!
     
    Last edited: 14th Aug, 2015
    MTR, Bayview, marty998 and 3 others like this.
  19. drg86

    drg86 Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    273
    Location:
    Newcastle
    I think it depends on what stage you are at in life. Kids/investments/job etc.

    Right now I'd rent out PPOR as a first step moving into a cheap rental, then let my lowest performing IP go if I needed further funds. Later on in life if I had built my dream McMansion I'd probably let the portfolio go before the family home.
     
    Esh likes this.
  20. Waldo

    Waldo Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    222
    Location:
    South Australia
    Sell it in a heart beat if it made financial sense.
     
    Ben Wilkie likes this.