Join our investing community

Should I sell the IP?

Discussion in 'Real Estate' started by 2beducated, 29th Apr, 2010.

  1. 2beducated

    2beducated New Member

    Joined:
    29th Apr, 2010
    Posts:
    4
    Location:
    sydney, nsw
    Hi All,

    We have an IP bought 8 yrs ago for $220K it is a 2 bedroom unit now 11yrs old and is located near the Parramatta area. We used the equity of our PPOR to buy this IP and still owe $220K. The value of the IP is now about $280K & I'm getting a local real estate agent to do an appraisal and the rental income will go up to $320/wk in June. As you can see there hasn't been much growth. We're considering selling the IP to reduce the mortgage on our PPOR or look for other IP. The long term trend provided by APM is about 9%, should I sell or keep persevering and hold?

    Will appreciate any suggestions.

    cheers
     
  2. KateMelb

    KateMelb Active Member

    Joined:
    17th Apr, 2010
    Posts:
    33
    Location:
    Melbourne, Victoria

    Gee, 8 years is a very long time for only $60K growth. I wouldn't accept that little growth in 2-3 years! Given how rapidly so many other properties have grown, perhaps it's wiser to sell and find something with more rapid capital growth. Watch our for CGT though - that might eat much of your profit.
     
  3. Jacque

    Jacque Team InvestEd

    Joined:
    16th Jun, 2005
    Posts:
    1,885
    Location:
    Sydney
    Hi 2Be

    $280K sounds very cheap for a 2 bed in Parra- is it renovated at all?
    Before you consider selling via a REA, make sure you contact me as I may have buyer clients looking to buy in this area.

    Parra area is doing very well at the moment- with all the activity going on with new building and it's an active market out there. If your unit is well located it will sell quickly- feel free to PM me details if you like.
     
  4. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Unless there are maintenance issues in the block I'd Hold it.
    It's not costing you anything and from now on as your rents go up so will property prices. Also, if you sell it you'll have selling expenses, you'll pay capital gains tax plus you'll have new buying costs to buy a different 1.

    Parra is not a bad area to own a property.
    You bought near the peak and your unit was stuck in a low part of the property cycle but it will be growing from now on.
     
  5. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    It's an interesting issue and the answer will depend on your long term goals and personal circumstances. As a general rule I do not favour selling properties due to the costs involved although it sounds as if CGT may not be a large issue.

    If your goals are to acquire a property portfolio, then do you have adequate equity available or is your issue one of income servicing? That balance may help guide the decision to keep or sell. A 6% rent yield is a decent yield for residential property in capital cities.

    Sydney market has been down since 2003 and from all reports showing signs of recovery so it may be a good time to sell and buy again or as Billy suggests, it could be worth holding onto as that market is finally moving.
    Good luck
    Greg
     
  6. 2beducated

    2beducated New Member

    Joined:
    29th Apr, 2010
    Posts:
    4
    Location:
    sydney, nsw
    Hello and thank you all for your feedback….

    I should have used the Introduction forum to introduce myself first, I only realised this after I submitted my first post so apologies…….. still learning to navigate this site.

    Investing has been an interest of mine for some time but I consider myself a novice investor with a lot to learn so I have enrolled in diploma of financial services (FP) and joined Invested last week to be better educated in all things investing and to meet people like you with similar interest and have the generosity to share information and insight. As I get up to speed I hope I will be able to make contribution to the forum as well.

    Hi Kate……….yes 8yrs is a long time and I was feeling discouraged so the first sign of an up swing I have been tempted to sell but CGT is also on my mine…

    Hi Jacque…….my IP is in Guildford which is near the Parra area, I used Parra because it is more known. It is 11 yrs old, not renovated and in excellent condition, lucky I have good tenant. Yes there is a lot of activity in the Parra area at the moment and there are new blocks built or being built in Guildford. My IP is in a handy location less than 500m from transport, shops and schools and the local agent said it will sell quickly. Thanks for the offer I’ll keep it in mind, with all the info I got I’m thinking maybe now is too early to sell as the costs and CGT and will take a big bite out of the small profit.

    Hi Bill…….no, there is no maintenance issue on the block, it is in good condition. Your right, in hind sight I bought the IP at the peak of the cycle and only now it is starting to turn, I’m thinking perhaps I should wait a bit longer to see a little bit more of the growth cycle.

    Hi Greg……..initially the goal was to build a property portfolio using the equity from this IP but there has been little growth and I did not want to use any more equity from my PPOR as I felt it would be too risky. So my investment strategy has been stalled and as a result I’m trying to get better educated. Any tips will be much appreciated.

    So now it’s a wait & see game………and I will need all the good luck I could get..

    Again thanks to all!

    Cheers
    2beducated
     
  7. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Wait a bit longer?
    I'd keep it forever.
    Access the equity and use it as a deposit for your next 1.
    You'll thank me later. :D