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is it wise to sell and cut losses?

Discussion in 'Real Estate' started by mumeco, 5th May, 2008.

  1. mumeco

    mumeco Active Member

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    Just wondering
    I own an IP in Stanmore, 1 bedroom with undercover carpark, bought in 2002. Owe 230000 on it. Bought at 290000. Basically paying interest only. However, I bought this off the plan, and probably paid too much. The value has only increased about 50000 since 2002. Rent = 340 per week. Interest = 900 per fortnight.
    Am thinking that it was not a great investment and now is costing me a lot given the rate rises.

    I know these are very sketchy details.

    Should I:
    Renegotiate the home loan to try to reduce payment amounts?
    Sell now?

    I won't have a high tax rate this Financial Year so that may cut down CGT.
     
  2. crc_error

    crc_error The Rule of 72

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    a property purchase should be viewed as a 10 year investment, sounds like your only 6 years through that period..

    if your interest only, you can't reduce those payment amounts.

    Tax on $50,000 is only about $7,000 so really not much.. plus purchase costs will be taken out of the $50k which will reduce that figure further..
     
  3. JustB

    JustB Well-Known Member

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    As crc_error mentioned - you haven't held the property through a full cycle yet. Given you bought at the peak of the Sydney boom, your estimated capital growth sounds pretty good - other properties/areas have done much worse. If you can afford to hold it, I would wait and see how it performs over the coming few years. If it still looks like a poor investment, at least sell it for a better profit during the next boom

    That said, your interest payments sound very high. $900/ft on $230k is over 10%pa. If that is the case, there are definitely better rates around. You should be able to re-finance and reduce your fortnightly payments to ~$750-$780.
     
  4. mumeco

    mumeco Active Member

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    I think that's right, actually...I have been thinkin v. hard about refinancing the loan. I wonder if I should go for Myrate or something like that. I'll have to look into it a bit more. And I think that if i could reduce my payments it wouldn't be as stressful as it is now.

    But thanks for the thoughts about the property cycle.
     
  5. mumeco

    mumeco Active Member

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    Best home loans?

    So another question is what the best home loans are. I think I just need a basic interest-only loan with on-line access.
     
  6. DaveA

    DaveA Well-Known Member

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    Which bank will allow you to play the valuation game and get a higher valued price... Im sure id be happy to pay an extra 10-15 basis points on a mortgage if the property was valued at 20k higher....
     
  7. Jacque

    Jacque Team InvestEd

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    Hi Mumeco

    Did you get a depreciation schedule done when you purchased? This would further reduce your out of pocket costs, though I would assume it's OTP status means you had this done at purchase time.

    I wouldn't sell right now, if I could afford to hold. Sydney's property market has buying opportunity written all over it now, and with excessive listings, I'd prefer to be a buyer rather than a seller. You're not overly neg geared, by the sounds of it, but a good broker should be able to assist with refinancing, should you wish to shop around for a better rate. Just watch out for nasty exit costs and best of luck :)
     
  8. mumeco

    mumeco Active Member

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    Thanks very much for the advice. Will start looking into refinancing.
     
  9. mumeco

    mumeco Active Member

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    Refinancing

    So, based on the discussions in this forum, a mortgage broker seems to be a good first port of call.
    Trouble is I don't know anyone.
    I also gather it's worthwhile asking a couple of MBs for their opinion.
    Could someone please recommend a good starting point?
     
  10. handyandy

    handyandy Well-Known Member

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  11. DaveA

    DaveA Well-Known Member

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    Good Old Rolf, Is there anyone who doesnt use him :D

    Rolf has my vote, goes above and beyond what is expected and knows his stuff incredibly well. For interstaters i wouldnt be put off as there is no real need to do face to face as everything can be done electroncially...
     
  12. mumeco

    mumeco Active Member

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    Mortage brokers

    Can I just check that there is no bias via this website about ASAP, i.e. the recommendations don't come from their staff etc?
     
  13. DaveA

    DaveA Well-Known Member

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    Nope, just a happy client...

    As far as i know Rolf has 6 people directly working for him in his office. He also has brokers around the country working under the ASAP name. As far as i know Rolf is the only one who gets around and posts, but does post more often on somersoft than here though...
     
  14. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Nope - no bias here.
     
  15. mumeco

    mumeco Active Member

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    Okeydokey!! (Does anyone say that anymore?)
    I'm calling today to see what they have to say.
    fingers crossed