Forced to Sell Investment Property at a Loss ~100k

UPDATE

  • Thank you for all your replies, I realise didn't make it too clear its already sold signed, so no going back and looking at the poll I don't have the "wish could go back and not sign" regret

  • The tenants are a normal family with 2 kids, new cars, on the annual inspection pictures from RE that are provided to us they seem to have normal furniture tv nothing crazy but not living on mattresses and saving big $.
    I don't mean to pry into their life but I am guessing they live on credit like most people these days. Going from a good wage to jobkeeper is a big adjustment to myself so I can imagine it is the same to them, kids are expensive too. Anyway I don't think legally I can pursue them for rent at this time anyway nor I would like to for somebody that is suicidal (benefit of the doubt)
    The straw that broke the camels back is really my job loss and bro's wage cut.

  • Couldn't evict them even if we wanted to at this time

  • This whole thing also made me realise I don't think I am cut out for the responsibility of being a landlord. Before covid it was pretty straight forward but now it seems fighting for a monetary loss from my pocket may bring a much bigger loss to somebody else even tho I am in the right.

  • Not sure what the agent told the buyer about current tenants/contract
    and what he is obliged to say by law. Pulled the trigger on a loss, paid his fees don't want to know :(


Me and my brother have/had a joint investment property (3 bedroom house in Melbourne south east suburbs).

We bought this place late 2018 for high 600K but with fees stamp duty and some minor touch ups it owes us ~730K. We had a deposit of 80k and at the time I had a ~100k pa job and my brother ~80K.

Place came with tenants on a yearly contract which took care of alot of repayments. We didn't struggle at all and happy to do any/all maintenance requests (which were all minor)

Obviously as covid hit everything lined up against us:

  1. Just before covid hit we had some damage to the plumbing by tree branches we forked out 6k each 12k combined - no problem we had cash on side for this
  2. Our tenants both lost their jobs (couple with kids) initially they agreed to pay 80% rent then 60% and then they said they are hardly scraping in, the female apparently had attempted suicide. Really tough situation, I got kids myself there is no way I want to leave some kids without a parent. Haven't pushed for rent last month and got none.
  3. going from 100k to 1.5k a fortnight taxed is a big drop so we applied for mortgage holidays which are approved but still getting interest added.
  4. boss told me unofficially a few weeks ago once jobkeeper is over cutting down to skeleton crew and can't afford to have me on, he doesn't mind im looking for new jobs while at work as there is not much to do, but there is no jobs!
  5. Brother had to take a 30% wage cut.

At this stage we have seen a few professionals for advice and we have been told to sell NOW for anything we can get, things will get worse and apparently the media and rba don't want cause a panic but its alot worse then they say.

Also the bank said for our own good no extension on the 6 month holidays will be given, between the lines they said exactly the same thing the professionals did.

The bank said its already on their record we are on the 6 month deferred mortgage payments and if we default on payments in the future that will be a big black mark on our names for a long time.

Speaking to family and friends, and with deep and long consideration we went to put the place on the market.

RE said no chance we will get what we paid, said start off with 20K discount.
Was no interest dropped by 5K per week at 30K we got alot of tyre kickers and lowballs. No genuine interest, after 4 weeks the best offer we got was 60K then what we paid. The agent said take it, said all sales are like that and his "inside sources" are saying it will get much worse. Once again got other advice and decided to run "before the market crashes"

60k off the price means we are really just over 100K out of pocket, so basically lost our whole deposit and a bit on top.

What else could we do? did the safe thing?

Id rather lose 50k now then 100k later I guess

Poll Options

  • 407
    Was the right choice in the situation
  • 52
    Should of taken a gamble and struggle

Comments

  • +9

    Sorry to hear see this. I'd get rid of it because -
    1. Tenant isn't able/trying to pay putting you at risk of default. Get rid of them. It's difficult for them but it'll be the end of you if you don't.
    2. Property market is depressed and it's going to be a bloodbath - your real estate agent is providing reasonable advice. We're in recession but it doesn't feel like it because of the money the government is throwing at the tax payer.
    3. Your boss has already given a warning that he cannot afford to keep you so unless you have a buffer until end of next year, lose $100,000 rather than everything.

    • "get rid of them" they have a rental agreement and legislation says no evictions.

      • +2

        He says in his first line get rid of it - implying overall the recommendation is get rid of the property by selling and therefore also the tenants

        • +2

          the tenant will be at the mercy of the new owner of the property.

  • +7

    Only you know your own financial situation so if you did the calculations and really could not afford to keep the house then there was no other choice. Plus, you sought professional advice and acted upon it, so I don't think you could really have done that much more. I hope your situation becomes better.

    On a side note, real estate agent will always push for a sale, they get sweet sweet commission from a sale, doesn't matter if the owner makes a loss or whatnot since it's based on sales price so I wouldn't trust a word they say.

  • That sucks mate. Sorry to hear about your sitation and wish you the best. Sounds like you have done everything in your power to be a good landlord.

  • +2

    Also the bank said for our own good no extension on the 6 month holidays will be given, between the lines they said exactly the same thing the professionals did.

    It will get extended. It will give you some breathing room but don't bank on it getting your equity back.

    The agent said take it, said all sales are like that and his "inside sources" are saying it will get much worse. Once again got other advice and decided to run "before the market crashes"

    Agents will ask you to take anything because for them it is an easy commission. Agents don't have any inside sources unless those sources are corrupt as they are. You will definitely get low ball offers with the pandemic, the worst of the worst have come out of people.

    I feel for you. I've taken half rent on one of a studio apartment and zero rent on a small house for 3 months due to the person renting having to shut their business.

    Suggestion: do a lot of research around the area in the next 2 weeks (don't delay, time is money!), go to auctions, go to open houses, chat like you are intending to buy and see what the real situation is for yourself. Yes a loss might be bad but it might be a cashflow problem that won't tip you over the edge. That mythical equity you have won't help you meet the monthly repayments.

    Having being trained in finance & accounting, in finance 101 the lecturer said: the difference between $500k property and $500k shares is with shares you can sell $10k today and have your money in 3 days.

    This isn't aimed at you: we're over leveraged into property and this time we're not getting out of it, think of it like sub prime shock during 2008/9 where the housing market bought down the financial system. Only way we get out of this is if the government pays all our mortgages or banks take a cut on the debt.

    Reason: your $500k mortgage exists even if you've taken a 10% / 20% / 30% pay cut. Most people have mortgages with fixed monthly payments and even if you are 12 months away from paying off your 25 year mortgage you have to pay and refinancing (provided you have demonstrated cash flow) only kicks the problem down the road. The flip side is they believe over indebted governments will let inflation run up to say 3% while keeping central bank rates at 0.25% so inflates away the debt. Problem for us is having enough cash flow to survive.

    For the record I owe the bank a lot of money but below the median only because I didn't feel comfortable taking out an $800k loan but I have 30 years to pay. If I lost my job I don't think I can last 12 months which is probably the same for most people unless they are self funded retiree. I wish good luck to us all.

  • +7

    A sad story that has just made one real estate agent a fistful of money, and of course the government collects on stamp duty.

  • +11

    This is going to sound heartless, but:

    It's not your place to be a charity for your tenants. The moratorium on evictions is obscenely unfair to people such as yourself. You've lost a combined $100k as a result - and you're not doing a lot better than the tenants, by the sound of it.

    Sorry this has happened to you. Is there any kind of tax writeoff you can get as a result of the sale at a loss?

    • -4

      Yes very unfair to all the investment property owners compared to the people who can't even afford to pay rent. Investing is a gamble no matter where you put your money.

      OP. Are you or your brother in a position to move into the property and work something out that way?

      • +1

        It's sold already.

      • +4

        I'm assuming you'd be happy to give up 30-40% of your income to keep tenants housed ?

        • -6

          "me, me, me, me, me" one day you're going to have to see us, or (profanity) off to america.

          • +2

            @sarahlump: No thanks, I'm quite happy with the current state of Australia

    • Yes…I would have done my level best at removing those tenants or getting them to access their super.

      Yes…this Capital loss can be offset against future Capital gains.

  • +41

    I juat want to applaud you for your consideration to your tenants.

    Sorry I dont have anything productive to add at the moment.

    • +14

      Yeap a decent Landlord OP is rare on here !

      • Pains to read people like him to go through this. Good Luck and all the best in the future OP…

  • +5

    I wouldn't stress about it. Whats done is done. No point dwelling on the loss. Investments are risky. As harsh as it sounds, you played the game and lost. All you can do now is brush yourself and try again.

  • +12

    If you can't sustain the best thing to do is get out and try again when you can sustain it. It's not worth the stress and mental health issues it may cause if you try to hang onto it.

    My opinion anyway. Money comes and goes, the only real thing that matters is your health.

  • +10

    You were in no position to 'gamble' and take a chance. This was much better for your mental health and relationship.

    Plenty of opportunity to make more money down the track (legally).

    Congrats on getting the best out of the situation!

  • +4

    Get the money and don't take any further risks. This Pandemic has no assurance until vaccine becomes available.

  • +1

    You are the only person able to analyse your own situation and make decisions. From outside, I do think it was the best thing to do if you don't wanna live under pressure. I would probably do the same. I hope things get better for you/everyone soon.

  • I found a cheap bargain of a house already tenanted, but decided against investing because it was on the other side of the state and I was not able to be there, and I am not a handyman to fix minor repairs. Houses are not a sure bet, lets say if you cant find a tenant or your tenant leaves.

  • +2

    sorry to hear. make sure you keep your records with you and carry forward the capital loss on your tax returns so you can offset any CGT in the future.

  • Stay strong mate, you have both learnt loads in this process. To look at this positively, if you were to eventually buy back into the market, if you buy back in for less than you sold for you have a win on your hands… Its not your fault so dont beat yourself up about it, focus on the family and assets that you have and make the best decisions that you can from your current position.

  • +7

    The moratorium on evictions is expiring soon - with that you should be able to evict the tenants and find new ones. This will take a while in the current market so it is up to you to assess whether you have the cashflow to withstand this.

    I know your tenants are going through a tough period but the reality is that it shouldn't be on you to shoulder all the financial burden.

    A couple of silver linings if you do end up having to sell at a loss:
    - Any capital loss is carried forward indefinitely to offset future capital gains
    - Any income loss during this financial year (e.g. from reduced rent) can be used to offset any income tax already paid

    I would look to file your tax return immediately for a refund to help with cashflow.

    • +6

      Agree completely with this.

      Pure speculation, and at risk of sounding like a lunatic, but seeing recent government and RBA agendas and discussions, there is a lot of commitment to not let the prices of property fall. While the bank said they will not extend the payment holiday now, but in a few months time that may well change, or the government could follow in US lead and buy up mortgages from the banks.

      There is almost no constraint to what the government could or would do to save the market and the economy. Our economy is built on the housing market. Sure, it may fall by 20%, but there are "higher powers" out there that would swoop in to save the market if it comes to that.

      Not pumping property, but with government stimulus and central banks printing money like no tomorrow, all asset classes are rising and they cannot afford to see it decrease.

      If you haven't signed on the dotted line, I would hold on.

    • +1

      It might not actually be that long depending on where the property is.

      My tenants have not confirmed if they are staying on (couple unaffected by COVID-19) but in preparing for the worst I have looked around, most properties within a 5km radius have been leased within 2 weeks of being put up for rental.

    • -3

      why would you want to ruin people's lives? for money?

      • +2

        OP has lost their job as well by the sounds of it - where is your sympathy for him?

        • OP should totally apply for benefits if they've lost money?? sympathy and greed arent synonyms buddy

  • +2

    Get other tenants?

  • Only you know your own financial situation (and property conditions) to decide if this was the right decision. I would have held onto it (as I trust things will get better) but if you genuinely ran the risk of default, then selling was indeed your only option.

    I am facing similar situation where my property has sat largely vacant for months. Thankfully I can cover the shortfall with my own salary. The property is in a good, desirable location and we plan to eventually live there so selling is never on the agenda.

  • +3

    Really sorry to hear about your situation. Can you and your brother not move into the property and live there? If its an investment I assume you are renting elsewhere? Or do you also own a 2nd property?

    I've been going to inspections the past few weeks in Melb to get a guage on the market and watching it closely to hopefully buy my first home as the prices drop. Without the market dropping a little I'll likely never own so im hopefull for a slight dip/crash personally. One inspection I went to the agent told me the seller is prepared to take 25k less than advertised… I'm obviously no expert, but i'm a guessing that's a pretty good indication of things to come? Good for a first home buyer in a relatively safe employment position like me, but probably not great for people with investment properties.

    Also worth noting as a renter i'm also watching the rental market closely too. Our lease is up soon and we've already gathered a tonne of evidence for a 20 percent rent reduction, or getting the LL to do the upgrade/repairs that were promised verbally (and have them in writing this time) New split system, new blinds, and heavy drapes etc. Looking at the rental market right now I know we can get something quite a lot cheaper than what we are currently paying which is the same/similar or something the same price but with actual decent amenities (heating, cooling, a bath, a new kitchen etc.). I've also had a number of friends move over the past several months and all have been offered lower rents than advertised by the RE more than once while going to inspections.

    • -3

      New split system, new blinds, and heavy drapes etc… If I were the landlord I would show you the door.

      • +2

        The split system replacement was promised to us when signing our previous lease, and we agreed to a rent increase and sign on 18 months because if this promise. Stupidly we didn't get it in writing, now 16 months later and it's still not been installed.

        Current split system is a piece of Chinese crap over 10 years old and kWh rated for an area of about 20sqm, while the open plan living room and kitchen area is about 50sqm. Needs to run all day to keep the area a fraction above 10 degrees in winter and running 24/7 as few degrees below the outside temp in summer (it gets hotter inside than out without it running).

        We are paying about $2.3k per month for this "2 bedroom villa" which in reality is a 1 bedroom + study in Brunswick. We also pay our rent 6 months in advance.

        Landlord wld be an idiot to kick us out, they won't fill it again at the current price and wld likely sit empty for months unless he reduces the rent by 30 percent or more.

        • +3

          Wow are you in a new apartment or what? I paid around $2800 in Brunswick East for a 3 bedder townhouse. Modern, solar hot water, carpark etc. That rent is way too high and if you can't get reduction then move…

          • @lainey13: Lol, nope. It's a subdivided lot, big hpouse at the front and we're in a "villa" out back. So its kinda like an large granny flat is the best way to describe it? Has a driveway/parking, small outdoor space and right on the edge of carlton north. It is overpriced without the heating/cooling but if they'd replaced it like they'd promised i'd have said it would be about right or maybe very slighyly overpriced. In the climate at the moment without heaing/cooling its very overpriced. We will be moving out if they dont agree to the terms, we know we can get something the same for less, or much better for the same.

          • @lainey13: Reading this with this thread makes a world of sense now.

      • +1

        Blinds are also broken since before we moved in and due for replacement, and outdoor shades have broken off their hinges and not been replaced. All reasonable requests for a livable property.

        If you think this is unfair or asking too much then you shouldn't be a landlord

        • +1

          Doesn't sound unreasonable at all to me. Our landlord (thankfully we only had to rent for 1.5 years before finding our first home) only agreed to install blinds to one of the two living room windows and outright refused to have the internet installed (it was a private FTTP service which charged a $500 one-off installation fee to hook up the cables from the pit into the premises - I'm not talking about ISP connection). Also had to fight them for getting the electricity hooked up (again another private supplier one-off installation fee) and they never bothered getting anyone to investigate why there was water leaking through the bathroom light/fan when it rained O_O

          It was a Chinese landlord as well - so everytime I had to communicate with them it took weeks to get a reply through the RE. They also tried to take my bond when we left because there was a scuff in a single section of the carpet - luckily they didn't decide to fight that one (fell under "normal wear and tear").

          • +1

            @chartparker:

            It was a Chinese landlord as well

            I think you'll find it is the same for all landlords. Overpaid for the property and got no money to fix it up.

            Typical problem of everyone buying a property with all their capital then waiting for the prices to go up. (Rent seeking)

            Never seen a person who is borrowing to say I can pay $x therefore how much can I borrow. They want to know the most they can borrow then how to fudge the numbers to borrow more.

          • @chartparker:

            It was a Chinese landlord as well

            Ah the Chinese, they buy up houses here to sell to people who are citizens here. Pretty funny really.

            • +1

              @Ghost47: Sell or rent to citizens here. I'd go with the latter.

              If it's one thing I saw repeatedly in Adelaide, was "we pay cash for houses" or "we buy houses, cash" plastered over signs in the northern suburbs… and all asian POCs.

              It's no wonder a lot of people can't afford to buy houses 'cause all the reasonable ones are generally sold to overseas investors. And then there's the 20 - 30 people struggling to get the rental after that.

  • Based on experience, nice guys will finish last… never had a situation that goes the other way around.. never even heard of nice CEO.. all of them are jerks

  • +2

    So the sale price was 8% under what you paid plus costs. Not the end of the world, and you're out.
    Some stocks are down 30% plus from Feb for example, and many people have a far worse situation.
    You'll now live to fight another day and life will go on.

    As for the agent's predictions, they're often wrong so wouldn't take much notice when they're pumping you to sell. Ask the buyer if he told them the same…

  • Good luck OP! Take the L for now and rebuild your finances. Pun intended.

    Stay positive!

  • +1

    Ok, so the new buyers bought a house with tennents that cant pay rent, and no way of getting rid of them for while?.

    • +1

      well if they got a discount of 60-100k…a years a rent at $400 a week is only 20k…not to mention negative gearing..

      • Or they may have caught a falling knife. I certainly wouldn't have taken the risk.

        • +1

          neither would i—i much prefer having a primary residence paid off, drinking a coke in my bakcyard, than have a mortgage and 2 other investment mortgages delicately balanced with rent -__-

      • If you can just afford to buy with a 60 - 100k discount and getting 50% or zero rent then you're stuffed trying to service it for extended periods of time.

        Property prices won't be the problem. Cashflow will be the problem.

  • +2

    Think about it this way:

    Would you lose 50k? (divide by 2 is 25k which IMO is fine)

    Or would you lose 100k in 6months time with 6 months of worry and constant thoughts about it?

    I rather live 6months worry free…

    • -5

      Use name checks out, full of it.

  • +1

    I'm sorry to know about your situation mate, and I sincerely hope that things change for the better for you. However, don't bother with whether what you have done in the past - rather put your resources (including mental resources) into figuring out the best course of action to be taken in the present situation. What's over is over (except for any learning that you may take away), and it can't be changed.

  • Don't listen to the advice here. More importantly, don't listen to your agent's advice, he is just being lazy. Do your own research to find out what other places around your area are selling relative to 2018 prices.

    • +3

      Pipey just to inform you there is a big clue in the tittle !

      OP has done his move .

    • Quite hard to do your research on this atm… because around 50% of sold properties in domain.com.au or realestate.com.au show "price withheld". I've tried to contact the REA a few times and it appears in the vast majority of cases "price withheld" is usually a below-average price (not surprising in this market). The funny thing is in working out the suburb average prices these days, the real estate sites ignore the "price withheld" data and get an average of the other sold properties (which often have a good or not so bad outcome for the seller).

      This sort of stuff makes me question their editorial content when they say stuff like "suburb X experienced a 5% drop in prices for homes and 7% for apartments in 2020"

  • +1

    If tenants lost jobs they would be on jobseeker/jobkeeper and also getting rent assistance and family benefits for kids. Would be rolling in max gov assistance, and could afford rent, op has had the wool pulled.

    • +4

      i agree…landlords are expected to be generous and fine with things but i'm sure a lot of tenants would be lying about not being able to afford the rent if they're getting $750/week

      • +2

        Our tenants aren't renewing their lease as they have to move for work. Shame, they were good and not a great time to get new ones.

        The first pair that came tried to low ball us $100 off what the last guys were paying, and really even that price was $50 or so less than it should be. They said that's all they can afford, covid and so on. We said no. Then we learned they looked at the unit directly above hours and offered $80 more for that than for ours. All they could afford my arse. Just trying to take advantage of the situation.

        • +1

          Yep- wouldn't be suprised-everyone wants a bargain when they can, and i sort of don't blame them. It's a shame the gov made it so easy to do so////

        • Everyone is trying it on.

          Construction companies are getting employees to take 10% pay cut, getting JobKeeper subsidy and working gang busters to complete projects.

    • You assume they're eligible for govt assistance.
      Not everyone who lives here are eligible for that assistance, myself as a dirty foreigner (kiwi) won't get sh!t if I lose my job.

  • +2

    You made the right call to sell. The market has already dropped 20% from the peak (but SQM are falsifying the market statistics). It will easily drop another 30-50% from the absurd peaks we saw at the peak of the bubble (when you decided to take the risk). Good luck.

    • +1

      yes I can say defiantly bought at the peak but everybody else was doing the same so it made sense it will keep going up, just my luck always late to the party

    • Can you recommend a source to monitor house price / sqm ?

      I often find it misleading looking at long term graphs as the definition of a 'unit' is now something that could include a place bigger than what used to be a 'house'

  • -5

    Lol 50% drop don’t think so.

    • +5

      By all historical and international standards a 50% drop is basically locked in at this point.

      If you don't believe me please explain these graphs:

      House Price vs Per Capita Income

      Dwelling Price vs Full-Time Earnings

      Australian's are also the most endebted people in the world. That's is a credit bubble, not a stable market.

      We're in for a depression as this market crashes with 20-30%+ unemployment/under-employment and businesses failing everywhere.

      • -3

        Yeah nah doomsayer, don’t look up the sky will fall down.

      • +11

        I’m as skeptical as anyone about real estate as an investment these days, but saying 50% is likely is fantasy.
        The COVID thing is about as bad as anybody could have predicted a year ago - a perfect storm with interest rates at almost zero, so no relief there, huge drops in rental income and big time reductions in borrowing power as lenders reassess income potential with layoffs and zero income growth.
        But the worst case is likely to be blowing the froth off - maybe 20% down on a year ago if it gets ugly.
        People in Australia have decided housing is worth mortgaging their quality of life for 30 years. They are not going to suddenly decide only 15 years of mortgage servitude is the new deal.

        Incomes might drop a bit, raises will be hard to come by, and immigration will slow, so the rocket that was already sputtering will stall, but there is no mechanism that sees people default on their homes.
        People will weather it, forced investor sales will be sad affairs like the OP, and half the real estate agents will go back to selling TVs at Harvey Norman for average wages.

        But everyone else will look at the valuation, look at the mortgage, and figure selling isn’t on the table for another 5 years. Big deal. A few kids will share bedrooms. Some bad DIY will get done. Economists will worry about the housing sectors contribution to growth.

        The real world impact will be inconvenience, paying a bit more for a mortgage than you would have if you still rented, but no disaster.

        Hopefully, the outcome will be investors hating the sector for a generation so there is a chance for our kids to buy houses at a market cost governed by supply and demand, not speculative greed.

        • +3

          "but there is no mechanism that sees people default on their homes." Um… what is this discussion about? Someone who couldn't make mortgage repayments and was forced to sell in a falling market.

          "maybe 20% down on a year ago if it gets ugly." OP lost 17% (I think he's understating it to save face) on the investment he bought 18 months ago and he was lucky to get out when he did. The market is already down beyond 20%.

          I suggest you read this article on the last housing bubble Australia experienced. After that crash it took 70 years for prices to recover to those seen during the boom.
          The history of housing bubbles

          He who ignores history is doomed to repeat it

        • +1

          Incomes might drop a bit…

          'A bit'???

  • +7

    Sorry to hear - I dare say your wont be the only one losing big on investments during this time

    • +1

      thanks, I just added a update rather then reply to everybody regarding the main points addressed

      • +1

        I put a post when COVID19 started and the ban on evictions started saying how it was a bad idea

        In the end being a landlord in Victoria is bad at the best of times but during COVID19 it is a NIGHTMARE (both Commercial and Residential) - but generally speaking it can be lucrative

        Dont let this dishearten you from future investing shares, Property business etc - Reflect and look at this as life lesson - I have Lost big money plenty of times but i have never given up investing and chasing my dreams you shouldnt either

        • +4

          Why would you be a landlord when you assess it as bad at the best of times?

          • +2

            @mskeggs: Future capital gain potential.

            For the vast majority of investor, rent is there to help the holding costs of the property.

  • +22

    The agent said take it, said all sales are like that and his "inside sources" are saying it will get much worse.

    Meanwhile the Agent is telling buyers: "Take it! I have an inside source, prices are going to skyrocket very soon!"

    Never listen to an agent, they're on nobody's side but their own.

    • +2

      Exactly, they just want the sale.. it's based on volume and they couldn't care less what price it sells for.. there's a good read on this in freakonomics that's rather insightful

  • +3

    Property is generally based on 'time in the market'.. not so much 'timing the market'..

    it's unfortunate that you've bought at the peak and are in a forced selling position now..

    There will likely be many others like you (except for being so open and transparent about it) and there will be many others that will ride it out for the long term one way or another

    (Btw if you think house prices are hit hard, just be glad it wasn't a box in the sky dependant on city dwellers or internationals)

  • -1

    Sounds like op got conned by re and tenant for a quick sale and a way of getting out of paying rent, what proof do you have they are living on cc and suicide attempt?

    • +1

      bobsam is a bot. not a person, spam bot.

      • look in the mirror

  • +1

    Maybe buy Barefoot Investor for your tenant a goodbye gift - WW half price!! https://www.ozbargain.com.au/node/548985

  • hey man you did well sept there will be more price reduction in Mel and Syd.

  • +1

    Hey mate, I think you did the right thing to cut the loss early, investment is never easy. People love property investment because they can leverage the crap out. I owned an investment propety (and i admit i was very lucky to get the property at the right time), but i would never buy a 2nd one (unless it is a super bargain, and it is positively geared).

    People don't realise that the transaction cost of property is very high. Once you commit in an IP, you already down ~8% (stamp duty + selling cost), on top of that liquidity is terrible.

    You will have your time to make up the loss. All the best

    • What about managing a property in your opinion? That either costs money or time, or both. I don't think newbie property investors consider how much time and effort it can take to manage a property, but I'm not sure.

      • +1

        Yup I agree, either it costs money or time and skill. For my IP, the RE agent charges 6.6% which is fine. But maintenance with an old house is a pain in the butt. On top of that you have the fixed cost i.e. council rates, land tax, water rates insurance, for myself this fixed cost and agent fees eat up about 30% of the rent income (one thing to note that my property appreciated a lot during this period so land tax and council rate increased significantly). There's not much room for good cash flow. All you hope is capital gain, which might or might not come. I also invested in shares, and it's much better experience.

        One advice I can give is that if you borrow money to buy a house, it's better to borrow money and buy ETFs/shares. If you are smart with structuring your assets, you can get very cheap loan to buy equity. ETFs is a much better in term of risk too, imagine you spread your risk to hundreds or thousands of companies. Chance of this going to crap is much lower than your house going down in price.

        • Yes I've heard it may be a good idea for people who know what they're doing to borrow to invest. I personally have never done it despite my investments (shares and ETFs) doing quite well. It's somewhat tempting but for me but a bit too risky as I feel like I'd have to develop my knowledge more first, would be interesting to try at some point though.

          I guess with property it's all about waiting until the mortgage is paid off, then your cashflow becomes very strong. At least property investors have negative gearing, although that is somewhat controversial as well.

          • @Ghost47: Hah, that's the most common misunderstanding around negative gearing. Negative gearing is applicable for all investments not just property. You can negative gear shares as well providing the shares produce dividends. Best strategy is to buy US etfs like NDQ or IVV, they are good with Cap growth but very small dividends. However you can claim negative gearing on that, i did the math and the effective borrowing rate to buy those are around 0.7 - 1.1% depending on your borrowing rate.

            • @od810: Yeah, I know that you can negative gear with shares as well. Was simply saying that at least they have that (not to imply that share owners don't).

  • -6

    Maybe the government should help bail out landlords too. I mean, if you have a small business you instantly get some free cash by filling out some online forms. If you're a builder you will likely keep your job…newstart payments have increased and landlords can't get rid of non-paying tenants. Landlords just never get a break.

    • +8

      Landlords just never get a break.

      While landlords are hurting, please take a step back. An investor is by definition, someone who purchases additional property with the intent on generating income from it, so presumably own more than one. Investing is no different from playing stocks; it’s not something you have to do, and people shouldn’t gamble with money they cannot afford to lose. The real estate market has been misguided by this truism that property is ironclad, it isn’t. You’d think we’d have learnt this lesson after the mortgage crisis.

      Home ownership is a luxury in Australia and owning multiples is even more so. While it sucks for people like the OP and my parents, the landlords will not starve. When the welfare faucet gets switched off and eviction moratorium lifted, it’ll be a renter bloodbath.

      • +2

        When the welfare faucet gets switched off and eviction moratorium lifted, it’ll be a renter bloodbath

        Landlords can only rent at what the market can afford. With almost zero immigration this year demand is going to be down.

        Being a small time landlord myself (a tiny 37sqm studio that I am only getting half rent on right now). I'd say if renters can't afford to pay (don't forget a lot of people have taken 10% pay cuts) and high buy in prices for property then we're going to have a double problem:

        Higher vacancies because of hold out landlords
        Lower property prices because everyone's taken at least a 10% salary cut

        People believe circumstances are normal but it isn't. People just needs to read history of the Spanish flu but factor in it is worse due to high speed travel spreading it everywhere, only saving grace is we are better at medical treatment now.

  • Not all gambles pay off sadly. You tried to minimise your risk and did really well covering but given the current circumstance, it's really unfortunate.

    In no way could anyone see a pandemic like this coming.

  • +5

    Thank your lucky stars you got out when you did. There is going to be carnage in the AU property market, especially apartments.

    • Yes it does make me feel better that everybody is telling me this even our accountant and financial planner

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