Selling My Unit or Rent It out??? Which One Would You Chose?

LEdwardrw on 13/09/2018 - 12:01

I've purchased a unit with 2 bedrooms at 275k 3 years ago in Adelaide.

Now, it is the time to move out as my second baby will be born next year.

But, it is not sure which one I need to chose between selling the unit or rent it out?

The current situation;

The remaining mortgage is 100k

Every month we pay 530 including principal + interst

Here are the comparisons;

  1. Selling out

The purchased price was 275k but, I think we paid a little bit high at that time.

It would be sold probably around 260k now or maximum 280k if I am lucky.

Since the remaining mortgage is 100k, I would get at least 140k (after paying all fees to real estate agent). I will be deposited to my bank account to get an interest.

  1. Renting out

The location is good so it would be rented it out quickly at 280-290 pw. The next unit is currently leased at 315k.

However, if it is leased, I need to think many things.

My salary is not high - 58k and I am the only income earner in my family.

So, if the income from rent occurs, it would be added to my taxable income, which will reduce the benefits from Center-link.

And after calculating all fees and maintenance costs, I would get nothing from leasing it (tenants would pay for my mortgage though).

It was build in 1958 but renovated in 2004. So, no depreciation can be applied for tax reduction.

What would you chose?

Home & Garden

Comments

    • pandas on 14/09/2018 - 23:06
      +1

      Unsure about Adelaide, but the housing market has definitely dropped around certain parts of Sydney. I was looking at Winston Hills at one stage, peaked around 1m but has dropped to around the 800k mark recently.

      On another note, my younger one is turning 2 and we've been surviving in a 2 bedroom apartment just fine.

  • zrmx on 15/09/2018 - 00:38

    Mmm, if you aren't too tight for cash, then

    (tenants would pay for my mortgage though).

    You've mentioned a very big benefit already, long term.

    And some really good comments above, had been quite educational in analysing/thinking about perspectives. Thanks fellow OzBargainers that are commenting =)

  • dts88 on 15/09/2018 - 06:28

    Stay at where you are now.

    Do not rent your unit out until you buy another one. You will need to pay tax for your rental income, plus may have to pay capital gain tax one day(if the property value gone up one day)

  • minotaurian on 15/09/2018 - 08:57

    I am assuming other unit prices in the area would have stagnated as well. And I assume you are worried if you rent your current unit, it may be positive cash flow bumping up your taxable income. There are three scenario to consider.

    1st. If expenditure on your current unit (maitenanece, body Corp, interest) is equal to rental income. It is best to keep, assuming you are able to afford repayment of your new house.

    2nd. If expenditure is "significantly" less than rental income. Hence you be in the positive, You can sale,and then buy another unit but pay only the deposit, so you have access more tax deductible interest. Also buy your house with an offset account and put all your savings into there.

    3rd, if expenditure is "slightly" lower, better off to keep,live in it for 6 years to fulfil main residence exception on cgt, buy a new house, hold onto the rental until the market strengthen, and then sale to take advantage of cgt exemption.

  • nicksinternet on 15/09/2018 - 09:03

    Hi OP, what suburb?

    I had a quick look through the comments, apologies if you've already said.

  • mahazza on 15/09/2018 - 10:04

    Numbers are fine, but when you get that first lot of rent and realise your mortgage is getting paid off for you and you get extra cash too … oh man what a great feeling!

    Adelaide is at the end of it's property cycle it seems, in the next 5 years it will be good for you to have some real estate.

    Cheers

  • abuch47 on 15/09/2018 - 14:44

    Buy a bigger house with the equity and then either keep the unit or sell at the same time.

    Adelaide is never gonna drop much. Interest rates may rise. Adelaide has had a small bubble from 1995-2010 and then slumo and then slight rise since but nothing compared to the overvaluing like the eastern states which are more high risk/high reward.

Login or Join to leave a comment
Login Join