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Sell for cash investment, or rent

Discussion in 'Real Estate' started by rjc79, 18th Jun, 2008.

  1. rjc79

    rjc79 Member

    Joined:
    18th Jun, 2008
    Posts:
    5
    Location:
    adelaide
    So I'm undecided what to do, is the market really going to go up 20% over the next 3 years? I want to spend 2 years overseas, an I don't know what to do.

    Do I

    a) borrow 20k holiday loan keep and rent the house pay the difference back when I get home.

    b). sell the house put $30k into a high interest savings account.

    I own about 30k in the property, but if I did sell would I really lose out on this.
     
  2. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    Without knowing the specific of your circumstance, I'd say that this probably isn't the best time to be selling property, the market has really slowed down. From all the chats I have had with real estate agents of late it seems it is taking weeks often months to sell properties, with many properties needing to be relisted at reduced prices to clear.

    Plus with rental shortages around the country you will probably find that even if you don't get a great deal of capital growth over the next 12 - 24 months you will probably get some good growth in rental yields.
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    ... except in Adelaide where the market is still relatively bouyant (depending on the area). I'm only assuming that rjc79's property is in Adelaide given his location.

    I haven't had my Adelaide properties revalued for a while, so I'm not sure how things are going at the moment. Rents are certainly rising, but whether that translates into higher yields yet, I'm not so sure.
     
  4. bella

    bella Well-Known Member

    Joined:
    6th Jun, 2007
    Posts:
    48
    Location:
    QLD
    20% return over 3 years is about 6.4% p/a compounding.
    It isn't exactly huge capital growth, it is pretty typical for property.
    But like Chris says, rental yeilds are likely to improve which may make it more worthwhile.

    Cynical me thinks this is coming from those real estate institutes that try to make it look like the market will go gangbusters forever, and tweak the way they present statistics in their media releases. They won't put out a release saying "growth is slowing dramatically", rather they say something positive sounding like "expect 20% returns in the next 3 years". While both statements are true, one sounds more appealing and suits their interests more.

    With high transaction costs in selling the property I think it is usually best to hold on to property as long as you can, because it costs a fortune to sell. Have you considered how much you will have after selling costs are taken into consideration?
     
  5. Saskatoon

    Saskatoon Well-Known Member

    Joined:
    17th Oct, 2005
    Posts:
    67
    Location:
    Aldgate, SA
    It depends where your property is. BIS Shrapnel are predicting a 16% increase in median Adelaide R/E in the next 12 months; last year it was a 19.1% increase (REIA figures). Remember these are averages! I believe historically Adelaide's increase over 80 years or more averages 7% p.a compounding.
     
    Last edited by a moderator: 20th Jun, 2008
  6. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    I also believe that it's not a good time to sell.
    Is the house your principal place of residence or an investment?
    If it was an investment and you sell it you will also pay capital gains tax and you don't want that to happen.
    Cheers