wwyd: keep or sell IP

Discussion in 'Investment Strategy' started by TMNT, 22nd Jan, 2019.

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  1. TMNT

    TMNT Well-Known Member

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    long story short, I own a IP In logan area 50% share with a former employer, we are not in any disputes of any sort
    I currently have 4 IPS in the area
    my partner has discussed selling the property recently due to personal reasons,
    my share is unencumbered

    I have considered getting a loan or cash and buying him out

    however, in a moment of potential negativity, im thinking of selling, and freeing up some cash, and comittment. I dont need the cash for anything, Im not intending to buy any more IPs in the near future

    Real estate investment is all about long term, slow and boring for me

    market Timing wise, to sell isnt bad, or great, potential growth for the area isnt going to be huge short to medium term, long term, who knows

    shall I sell to increase cash, reduce liability or am I breaking the fundamental rules of leverage leverage and time in the market?

    if I was confident there was medium to short term gains, I would keep it no ifs or butts,
    but speaking to a few agents they are saying they dont see any foreceast growth and the area is a satellite suburb and has performed rather poorly
    looking for feedback
     
    Last edited: 22nd Jan, 2019
  2. jefn89

    jefn89 Well-Known Member

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    Comes down to your goals, tax situation, can you get a better investment elsewhere i.e. commercial etc

    I'd speak to your accountant before considering anything + be clear on weighing up selling vs keeping..

    What one person's solution may be may not work for someone else :)
     
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  3. Tonibell

    Tonibell Well-Known Member

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    For me it would depend on the price.

    Have you got an agreed process for when one of you want to get out ?

    They might just want a quick and simple transaction rather than the best price.
     
  4. TMNT

    TMNT Well-Known Member

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    definitely, not intending to screw or make a profit by lowballing eachother. a fair and equitable escape, the only thing is that I might keep the agency comissions if we settle privately
     
  5. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Hi TMNT,

    I think you are breaking the fundamental rules of property investing (time, leverage, compounding), as you suggest.

    The only reason I would think to sell at this point, would be to disentangle the joint ownership structure so you can create some more autonomy for yourself. And this is a valid reason.

    However, if there is no specific reason to sell, better to hang on methinks.

    Thanks,
    John
     
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  6. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    I think it would depend on price too.
    If you can get his share cheaply it would work out well. If you could get it for market value you are still potentially better off than selling and buying a replacement because the duty will be roughly half.
     
  7. TMNT

    TMNT Well-Known Member

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    that is a very good point!
     
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  8. Angel

    Angel Well-Known Member Premium Member

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    I recall @TMNT mentioning his frustrations with properties in Low Socio-economic regions and especially frustrations with property management. I suspect you are onto a far better PM these days. You said that you have other properties in the same location, so if it was me, I would take the opportunity to sell and use the cash as a buffer or offset. The "Golden Rule" of never selling goes into the same bag of myths as "Property always doubles in value every seven to ten years".
    4 IPs in Logan for an interstate landlord equates to 4 headaches in my view.
     
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  9. TMNT

    TMNT Well-Known Member

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    You are right angel,
    I call myself the slumlord:)

    Ive been shedding properties that i deem as headaches and that have experienced lower growth recently, and logans growth has been quite goof

    As terryw mentioned, the opportunity cost of selling can be big.

    Just trying to balance in my mind if an extra lcc property is another headache or just part of having another ip in the portfolio, whilst a little ongoing sacrifice will lead to better rewards down the line
     
  10. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    TMNT, I always think that the purpose and expectations of a property is really important - and that each property plays a specific role in a portfolio. This way the properties are less likely to disappoint you.

    For example, a house in metro Sydney on a large block will give you growth but little yield. On the converse, a block of flats in Port Macquarie will give you yield but not growth.

    Both can be good investments and play an important and specific role in a portfolio. And it is only a problem if you expect one thing and the property delivers something else.

    In your case, is it possible that you bought into Logan hoping it would be a growth play, but it is really a yield play? And the problem is more the mismatch in expectations?

    Perhaps if you view the Logan properties as low growth yield properties, then you can hold them while they play their part (giving cashflow), and then blend in some other inner metro properties with better growth prospects?

    Just a thought.
     
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  11. KinG3o0o

    KinG3o0o Well-Known Member

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    without knowing your overall situation, i would sell simply because you have 4 in the same suburb/postcode.. u need to diversify imho..
     
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  12. New Town

    New Town Well-Known Member

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    Ok, no loan so not cash-flow negative. Unless its wracked with maintenance issues I would keep. Particularly if there were some redeeming features about the property eg handy to cafes, transport, or has views etc

    The co-ownership is a small issue I guess. Can the partner buy you out? If you're keen to sell, just a straight up sale and divide the profits is the easiest, maybe?
     
  13. David Shih

    David Shih Mortgage Broker Business Member

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    Spot on John, I'm an advocate of ensuring people understand what each IP's role is in their portfolio - no point buying a yield property and expecting it to be like a growth property. If CG is good then it's bonus on top :)

    @TMNT, based on your own DD if you don't believe this IP will give you the growth you want then it might be worthwhile cashing out and look at other assets instead? Or keep it in your offsets so you can deleverage faster for now, and ready to pounce on the next IP when opportunities arise down the track.

    Cheers,
    David
     
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  14. TMNT

    TMNT Well-Known Member

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    nice points eveyrone,
    yes I believe there are two ways to look at it

    1. what will the area do in the future
    2. what the opportunity cost is
    3. Am I looking at a yield/cg play

    not too sure if I am looking to buy another IP, thats also whats holding me back,
    I am looking to pounce at low prices for a PPOR, as previously mentioned, I probably wont actively look for an IP, plus 5 in the area is a lot
    my intention originally years ago before the boom was to buy lower priced high yielding, so that when and if a boom came, the % increase would be higher whilst having high yield,

    The growth spurt I believe has passed, and now currently, its rented at $355 per week, down from $380 due to taking time to find a tenant, value $320k, is a decent yield