Who to Speak to about Property Advice and Whether I Should Sell My Place in Southbank?

lockmc on 05/08/2018 - 11:16
Last edited 05/08/2018 - 12:02 by 1 other user

I own an apartment in Southbank overlooking the Yarra (the view can't be built out) and I am thinking of selling it.
In the last 3 years I've owned it, I've seen the value more or less stay steady, or even drop a little bit (comparing to other sales in the building).

I'm at a point where I don't know if it is worth keeping, but I don't know much about the market, what direction it is heading in etc.
Is there people that are best to speak about this sort of thing to? I understand markets fluctuate all the time, but I don't really want to hold onto a property that isn't a good investment- I'd rather put my money elsewhere.
Does anyone have any advice here? Who to speak to? What they think the market might do?

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  [Deactivated] on 05/08/2018 - 11:36

  +2

  Market falling. Won't free fall but will definitely take a step back and stay there for a few years.

  If you can afford to keep it, do so. It's a buyer's market now and you won't get an optimal price as long as it's still a declining trend.

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  Baysew on 05/08/2018 - 12:02

  Is it an investment property or your residence?

  • 

    lockmc on 05/08/2018 - 13:03

    It's an investment. We rent it out on Airbnb full time and make about 12k a year after expenses.

    • 

      ihbh on 05/08/2018 - 14:45

      +1

      What was the purchase price? Purchase costs? I'm trying to gauge what your yield is.

      What is the expected net income if you rented as a standard rental?

      • 

        lockmc on 05/08/2018 - 17:56

        +1

        We paid 700k 3 years ago. I feel like we overpaid by about 20k. We are on the 16th with amazing city views. The same apartment on the 31st just sold for 700. The agent I've been speaking to thinks he could get 700 got this one without issue. So if we sold today at 700, we would be at a loss of almost 50k stamp duty + agent fees. As a standard rental I think about 3000 a month. We get about 4500 a month renting on Airbnb before expenses.

        Funnily enough we had a guest from last night literally ask us if we wanted to sell.

      • 

        garetz on 05/08/2018 - 23:04

        @lockmc: You make 4500 x 12 months = $54000 pa before expenses, and $12k pa after expenses. Something doesnt add up there. Maybe you should see an accountant. You are making a gross roi of 7.7% which is pretty good considering, but 0 capital gain means you are about break even after costs, well you should be but your after expense returns are abysmal.

      • 

        lockmc on 06/08/2018 - 07:24

        @garetz: Our expenses does include about 2500 per month of interest on the loan.
        The rest of the expenses are electricity, body corporate (6k a year), electricity, internet, cleaners etc.

      • 

        stirlo on 06/08/2018 - 11:21

        +1

        @lockmc: So the property is positively geared and you want to sell in a down market? Why?

        If you're paying $2500 in interest a month then you owe almost the whole value of you apartment right? Or your interest rate is way to high. (2500*12/.05% equals $600k loan) and you should probably be able to get under 5% interest rate.

        So your situation is you have maybe $100k equity in your apartment and its returning you $12,000pa profit. 12% return on you money is very good in this economy. I see no reason to sell at a loss unless you need the cash or your lifestyle is about to change.

      • 

        lockmc on 06/08/2018 - 11:56

        @stirlo:
        Yep so we have almost 200k equity. Paying 4.88% interest only.

        So this is my question about selling it. I don't know what the market does and doesn't do and not really aware that it's a down market. My concern is the money I'm making from positively gearing it is being offset by the loss in value.. And I'm unsure if or when that loss in value will stop. Southbank is getting alot of new apartment buildings which is scary. This apartment is slightly different in that it's in a prestige building on the Yarra (most are a block or two away) but not sure if that's enough to prevent the oversupply of apartments bringing the price down.

      • 

        garetz on 06/08/2018 - 14:01

        @lockmc: You have your answer then, now compare the % returns to the risk of the property diving in resell value, and to what % interest you can afford to keep it in a market that is on a downward trajectory. If you lose any principal value you are making a loss, and at that % interest return you are barely making above current interest + inflation. The risk to reward looks very skewed.

        The last time there was a property crash was during the gfc, where prices dropped 5-20%, atm there is a slight drop in the mid-top end of the market, which might not affect your unit, but oversupply will definitely affect it in the future.

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  MrHyde on 05/08/2018 - 12:11

  +6

  Apartments are bad investments.

  I bought an apartment in Southbank 15 years ago and it has not even doubled in price yet. However, that is my residence so I have got value out of it.

  The things with apartments is that you can get good cash flow as the rent is higher compared to houses, but capital growth is terrible. It really depends on what your investment strategy is. Are you wanting capital growth or cash flow?

  Also, I dont see prices of apartments going up anytime soon as there are 1000s of new apartments being built in Southbank every year. If you bought into a MICM apartment in the last 10 years, they have a reputation of being small and terrible quality. Their older stock - around 15-20 years old are much nicer with larger rooms and better quality buildings, although not as many features are newer buildings like party rooms, etc.

  • 

    GourmetFoodie on 05/08/2018 - 12:17

    Best advice

  • 

    dcep on 05/08/2018 - 12:30

    +1

    Sydney is different i think

    i know someone bought a 2 bedder unit at chatswood in 2013 for 630k and sold for 1m in 2016

    • 

      HardQuiz on 06/08/2018 - 04:42

      Sydney is always different!

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    Oofy Doofy on 05/08/2018 - 13:11

    You will most likely get a better return and fewer hassles by just investing in something like VAP. Rent/income paid quarterly, no hassles, more likely to grow in value vs buying in one location etc etc. You can leverage it up to 70% with many investment lenders/banks if you have high convictions about property returns long term. Peace.

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  AusGP on 05/08/2018 - 13:42

  I don't think there will be much in the way of capital gains in the apartment market but given you're cash flow positive 12k per year you could consider holding it - but it really depends on how much equity you have in the apartment to generate that 12k to calculate a proper return on your equity.

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  mbck on 05/08/2018 - 14:30

  If you are buying an apartment, you're not going to be aiming for capital gains. There is no way you can improve the apartment. The only time an apartment will gain is if you have the penthouse in a genuinely great quality apartment. None in southbank unfortunately.

  You are really aiming for positive gearing with apartments. For the price you pay, you should be aiming a higher rent than a house.

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  [Deactivated] on 05/08/2018 - 14:40

  +1

  Who to Speak to about Property Advice and Whether I Should Sell My Place in Southbank?

  Well clearly OzBargain for starters…

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  garetz on 05/08/2018 - 16:19

  There are 2 reasons you buy property, one is for principal value increase, the other is ROI - return on investment. Actually there is a 3rd as a loss leader for tax purposes but i wont go into that.

  If the principal value is not increasing, then you need to have a much higher Roi for it to be a worthwhile investment at approx double the current interest rate if not more when you take inflation into consideration, so i would be looking at a 10% roi. You said previously you are only making $12k pa, so unless it gives you a substantial tax benefit i would sell.

  Don't listen to people who say if you can afford to keep it do so, you could take your money out of that property and put it to work elsewhere that would make you much better returns, you want to make your money work as hard for you as you possibly can, and keeping a non performing property is not the way to do that.