Forced to Sell Investment Property at a Loss ~100k

monkeyfood on 01/07/2020 - 13:28
Last edited 01/07/2020 - 19:33

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
Financial

Comments

      • mrvaluepack on 02/07/2020 - 09:45
        +1

        If all the "professionals" are telling you this. You should have done the exact opposite.

        If they are able to predict the future, they should put their money where their mouth is and short some REITs.

        • Pufff on 02/07/2020 - 10:27
          +1

          You should read all the info before commenting
          Its generally true but I don't think it was an option cause of the impending job loss and wage decrease of OP and his brother. In addition to the $0 rent he was getting.
          Even if the market went up 50% if you can't pay the loan you lose the property.

        • JimB on 03/07/2020 - 12:41
          +1

          REITs are not residential investment properties.

          Even if property prices don't go down, the lack of cashflow can bankrupt people.

          • mrvaluepack on 03/07/2020 - 16:23

            @JimB: Duh! But they have a very close correlation.

            • JimB on 03/07/2020 - 16:44
              +1

              @mrvaluepack: If they are closely correlated, house prices would have fell 28% in the past 12 month.

              • mrvaluepack on 03/07/2020 - 17:14

                @JimB: Which commercial property fell 28%? The etf prices and shares were the ones that dropped in prices. You have to read the recent financial year reports individually to know the most recent valuations.

                • JimB on 03/07/2020 - 17:19
                  +1

                  @mrvaluepack: I'm sure could find some REITs that fell more than 28%, however I have quoted S&P/ASX 200 A-REIT Index (XPJ).

                  You can't accuse me of cherry picking.

                  • mrvaluepack on 03/07/2020 - 17:50
                    -1

                    @JimB: Those prices are shares/etf prices. Not the actual value of the properties they own. Like i said you have to read their financial reports to check how much their property value has fallen.

                    • JimB on 03/07/2020 - 19:41
                      +1

                      @mrvaluepack: That's what the market think the true value of the property is.

                      In a market downturn, Do you think the asset manager will write down the true value of the building or will they inflate it?

                      You're just being stubborn now.

                      You can't short a price based on what the asset manager publishes, you can only short or buy REITs based on the traded or market price.

  • [Deactivated] on 02/07/2020 - 08:26

    Wow that's harsh: "Couldn't evict them even if we wanted to at this time", no wonder renting is hard, there's no foundation for double standards when it comes to renting, last time I recalled in California:

    If the property was built before a certain period, (even if in a rich area )the Tennant pays a low market rent until they move out and break the agreement for life, but most affluent rich people wouldn't care about such loss.

    But in regards to you

    Now your permanently out of the market, so two ways things can go here:

    1 prices drop quicker over the next 5 years, and you can gain a opportunity back in, while retaininig your loss.

    Or

    2 the prices increase suddenly after the virus subsets, banks go back to greedy practices, and the prices sky rocket even more in the next 5 years, meaning you should have taken a gamble and held on while securing the property for rental, but at a lower cost…however if the property was purchased by the bank, then you had no chance securing option 2.

  • striker5950 on 02/07/2020 - 08:35
    +3

    wow, this is the calm before the storm

  • Robz on 02/07/2020 - 08:47

    You will have a capital loss you are able to use in your tax ( that does not expire ) so if eg you buy shares & sell at a profit , your gains are offset by your previous loss from the property so ask your accountant. You say there is a 100K loss. But you have not said if after ALL expenses & fees do you still owe the bank so were you able to clear the debt to the bank selling at a loss? If not that will bring another issue to be reflected in your credit rating

    • monkeyfood on 02/07/2020 - 08:52
      +1

      We basically lost the 80K deposit between 2 people which we equally chipped in 40K cash (our own money in the bank) at the start.
      we still owe some change atm to the bank but its something either of us will not default on or bankrupt over

      • screwball on 02/07/2020 - 12:11

        You are not in the worst position. As the guy above said, you now have a ~50k loss that you can offset future gains to. What this means is that when you make a capital gain in the future, you'll have to make more than 50k (or whatever your loss is here) before you start to accrue any CGT on it. Present day loss means future savings. Obviously it'd be nice not to have to bother with it, but it's not all doom and gloom.

        If you're going to purchase investment properties down the road, may I suggest looking in locales that have low prices and high rental yield? Outer suburbs with lower socio-economic demographics tend to be a landlord's gold mine. You can buy fairly cheaply by comparison to the big city properties, and you can fairly well cover the mortgage with the rent, and even if your tenants stop paying for whatever reason, you can often cover the mortgage with your income.

        I will happily concede that you likely would have ended up in a similar position with that strategy but it would have taken longer to manifest. Also when the market drops 50% it won't be dropping your property by that much, it'll be the million dollar shitboxes in Melb, Sydney that will suffer the most.

        • virhlpool on 03/07/2020 - 01:27

          What this means is that when you make a capital gain in the future, you'll have to make more than 50k (or whatever your loss is here) before you start to accrue any CGT on it. Present day loss means future savings. Obviously it'd be nice not to have to bother with it, but it's not all doom and gloom.

          Is it the case only for investment property or the property used by self as well?

          • duchy on 04/07/2020 - 22:52

            @virhlpool: You don’t pay CGT if you sell an owner-occupied property.

            So it’s applicable only on investment losses/gains.

  • [Deactivated] on 02/07/2020 - 08:53
    +2

    I feel for you. I've lost 32k myself and my stomach has gone to hell.

    Stress is bad at the moment. Hope it works out for you.

    • AMLagonda on 06/07/2020 - 22:58
      +1

      hope your doing Ok :/

  • MontyMacaw on 02/07/2020 - 08:59
    +1

    I applaud you in your actions and compassion. I would be moving on and planning my next up cycle. In the meantime live the life you can afford. The stress you had with the property is now gone. Having lived through a business receivership I know how much better life is after the knife falls rather than tying to dodge it. It takes time to dust yourself off and get going again but you have the experience of what went wrong. The setup was wrong to begin with. You made classic errors like buying at the top of the market and not vetting the tenants properly - this is particularly bad as they were sold with the property as an asset in reality when they are a liability. We can all say it’s bad luck the pandemic came along but the reality is those who are financially secure can weather the storm and those that are over leveraged can’t. There will always be storms of one kind or another and a bad tenant is a bad tenant regardless of their best intentions. Hunker down for now and enjoy the lower stress levels of dealing with just your own problems. It will feel better and it will get better. If you could make a good living prior to the pandemic you will be able to again. Next time get some proper investment advice. Believe me advisors will be doing a much better job in the future.

    • aspirepranesh on 02/07/2020 - 09:17
      +3

      Renter here, I agree with a lot of the thing you have said,

      but…

      I don't think OP made a mistake vetting the tenant. In over 10 years of renting, no one has ever asked me in my application how much savings I have in my account at the time of application. They have asked for a 100 point check of past bills and rental history which I have never defaulted on. I have been asked about my work, whether it is full time or part time or casual and how long I have been at the job.

      The issue is that the tenants were simply bad when it comes to saving for a rainy day (like now when people are losing jobs). I cannot go to sleep at night (even before covid) if I had no savings in my account for a rainy day. My wife has lost her job, but we haven't bothered to ask for a rental reduction as the landlord has been good to us for 3 years and we want to make sure we adhere to the contract as I am well aware that they have mortgage and payments that they need to make. It is simply a domino effect and OP and his brother had to be the far end of it taking most of the brunt, which is a bit unfair as they have done the hard yards.

      • Pufff on 02/07/2020 - 10:19

        I think you are the very rare exception.
        Keeping up with the jones isn't just a saying.
        I have seen homeless people with iphones.

        • aspirepranesh on 02/07/2020 - 13:25
          +8

          An idiot! Exactly how? Care to explain?

          I will leave this here to give you an understanding of how much of an idiot I am financially!

          • My landlord hasn't increased the rent in 3 years. We pay $400/week when everyone else in the building that we have come across pays over $430/week. That it itself is over $3500 less than what others have paid over 3 years!
          • They fix any issues when we request them.
          • They let us have a dog when we decided to get one. This was a big deal for us.
          • They have a mortgage of whatever that I am sure they still have to pay and also body corp fees.

          I plan my life around the bare necessities and don't like to stick it to someone else during hard times. Financially, my job is secure and we can live comfortably on one salary unlike a few unfortunate people in these tough times.

          Funny how you call me an idiot for holding a steady job, not relying on govt assistance, no debt, a 6 figure saving, not falling back on an agreed contract and doing what I call a "right thing"!

            • aspirepranesh on 02/07/2020 - 17:10
              +5

              @sarahlump: My new means include:

              • cutting down on unwanted purchases
              • reducing eating out and takeaways

              Both of the above have been successful since March, we have realized was about 20% of our monthly expenses, which we are happy to do.

              Doesnt include:

              • stiffing my landlord by asking for a rent reduction when we have been paying less than the average rental prices in the location we are renting.

              Guess what, my partner and I have learnt to be financially more responsible and secure with our lives now in the last 3 months.

              What you are basically saying is, I should pass on the buck to my landlord by asking for a rent reduction to continue with our previous lifestyle! LOL.

              Lets say my landlord was paying $1500 mortgage and $200 body corp fees totalling $1700 and my rent is $1735 a month and I ask for a rent reduction of $50 a week which is $200/month, now they are in the negative by $150 for no fault of theirs.

              I guess you don't know the meaning of "being a Responsible Adult" or for that matter "financially secure". So what's the point in trying to explain ay!

            • MontyMacaw on 02/07/2020 - 18:27
              +8

              @sarahlump: I disagree. Strongly. Not everybody exploits every situation. Those that plan for rainy days tend to better in life over all. Maybe it’s the sense of fairness and morals that works better for them. Those that exploit just because they can deserve bad things to happen and are possibly more likely to get them.

          • brendanm on 02/07/2020 - 20:17
            +5

            @aspirepranesh: I wouldn't worry about her, search some of her other posts if you want a laugh.

            • db87 on 05/07/2020 - 02:39
              +2

              @brendanm: I'm very surprised the mods haven't banned her yet. I'm sick of reading her bitter and judgemental comments to be honest.

          • serpserpserp on 02/07/2020 - 20:32

            @aspirepranesh: But but, think of the $10 a week you can save…

        • brendanm on 02/07/2020 - 18:17
          +2

          I get a feeling there's a little commie who might get another stay in banned camp again soon.

  • Bargainbattles on 02/07/2020 - 09:13

    Hey guys so if banks sell seized houses due to default for lower then the loan amount what will happen if 20 percent of the loans defaulted ? Will banks take the hit or raise interests rates ?

    • od810 on 02/07/2020 - 10:03

      They will go after your other assets. If other assets can't pay off the rest of the debt, most likely you will have to file for bankruptcy. However depending on the amount, maybe the bank will write it off.

      • serpserpserp on 02/07/2020 - 20:34

        You don't have to file for bankruptcy. You can come to an agreement to pay off your debt.

    • Pufff on 02/07/2020 - 10:14

      Banks will always find a way to get the money.
      There is also LMI which people pay for to cover the bank.

      • MontyMacaw on 02/07/2020 - 18:32

        If you want a bank to write anything off you need to enter into discussions with them. I have been successful in talking to the bank when I had a debt that could not be met. I made an offer of a weekly payment for 5 years equal to 10% of the debt - it was big. It was also 30 years ago in the early 1990’s recession. They took it. I had to sign a document of nondisclosure and agree that if I missed any payment I would owe the full amount again. If they can’t get the money easy they sell the debt for pennies on the dollar so this is a good strategy. I’d say an even better one in these times.

        • S2 on 03/07/2020 - 20:36

          So you only paid back 10% of the debt and no interest on top (besides any interest paid already)?

  • mrvaluepack on 02/07/2020 - 09:43

    Lesson - you were too highly leveraged.

    Never go more than 50% lvr on investment properties and you should be fine.

    • screwball on 02/07/2020 - 12:14
      +2

      Curious; Are you saying that any investment property should be paid 50% in cash or is equity suitable coverage for this rule?

      Is this some type of fancy investors advice or your own personal rule?

      • mrvaluepack on 02/07/2020 - 13:58

        Cash or investor funds.

        If you look at all commercial reits or direct investments, their LVR ranges from 40-55%. Although commercial properties might be a bit riskier, that should sort of give you a good indication of the level of risk professional investors are willing to take when investing in property.

        • serpserpserp on 02/07/2020 - 20:36

          Cash or investor funds.

          These are the same thing.

          If you look at all commercial reits or direct investments, their LVR ranges from 40-55%

          That has nothing to do with what "professional investors" accept and very much to do with what a syndicate of banks will accept from a leverage perspective.

      • netjock on 02/07/2020 - 14:16

        In the UK they will only give you an investment mortgage (buy to let) only if rent is 145% of repayments (P&I) and they won't let the mortgage run over 65 years of age unless you have a plan to pay it off (ie. big pension balance)

        • od810 on 02/07/2020 - 18:28

          Though rate in the UK is much much lower than Australia. Even with the record low interest rate @ 2% fixed term, the UK still comes out lower, their normal rate is around 1.4 1.5%. With that you can get rent of 145% of repayment. Though I generally agree with what you say, the lending practice in Australia is a bit crap, and the people tend to take risk here much more. Australia gets benefit from immigration so property price has been non-stop growing. It will be interesting to see what will happen in the next few years.

          • MontyMacaw on 02/07/2020 - 18:34
            +1

            @od810: People have treated investing in Australia like being at a casino.

            • od810 on 02/07/2020 - 18:36

              @MontyMacaw: Australians have the highest spending on gambling per capita. I have to admit, my younger self gambled a lot. I guess it's life tuition fees :).

              • mrvaluepack on 02/07/2020 - 19:22

                @od810: Investment professionals call this "speculation" not gambling :P

                • od810 on 03/07/2020 - 00:35

                  @mrvaluepack: No i mean, actual gambling in the casino :P, but i learn my life lesson and haven't stepped back in for 8 years. Then I also paid tuition fees on "speculation" with penny stock, but fortunately it's not huge part of the portfolio.

            • OzzyOzbourne on 03/07/2020 - 09:42

              @MontyMacaw: A government backed casino where its difficult to lose (providing you can get a Tennant and make the repayments).

              Through tax concessions, immigration, cash handouts, supply restrictions…. The government will make sure residential property always goes up

          • netjock on 02/07/2020 - 19:35

            @od810: Only thing lower interest rates do is allow people to borrow more. Nobody pockets the saving. Remember people are signing 25 - 30 year monthly repayments when their lease is generally 12 months.

            It is the same dodgy business model as WeWork. If you think about how fast WeWork got found out but there was one sucker (Softbank). Only reason it still works is people are financially illiterate enough to continue doing it.

            • od810 on 03/07/2020 - 00:29

              @netjock: I don't see any problem with borrowing more when your expense is less than your income and you don't over leverage. Imagine if the OP has low interest then he could save some of the rental income for rainy day, imagine if he has some buffer instead of borrowing almost 90%, he could potentially overcome this hard time.

              Not every single investment is gambling. Even with property there are still pockets & options to make it worth while. You need to do your due diligence and crunch the number properly.

              • netjock on 03/07/2020 - 09:59

                @od810:

                Not every single investment is gambling

                I never used the word "gambling". You must understand humans given enough time can justify every bad decision as an investment. If you ask enough broke old people it was either "bad luck" or "bad investment choices" nobody ever gambled away their money.

                I don't see any problem with borrowing more when your expense is less than your income and you don't over leverage. Imagine if the OP has low interest then he could save some of the rental income for rainy day, imagine if he has some buffer instead of borrowing almost 90%, he could potentially overcome this hard time.

                Wishful thinking about saving rent for a rainy day. If you look at property prices, rental yields and interest rates (excluding those who buy apartments for rental and those with big deposits) you'd know that rental income can cover interest plus maybe a little bit of principle repayment. That is why Australia is so in love with negative gearing.

    • Stopback on 03/07/2020 - 09:33

      50% LVR means that the amount you owe is half of what the property is worth. From a lenders perspective this is low risk because if you default on your loan, the sale of the property should more than cover what you owe.

      • netjock on 03/07/2020 - 10:01

        If you owe 50% on your property the bank / mortgage brokers will be falling over themselves to get you to remortgage to buy more property.

        I'd doubt many people with multiple investment property have actually paid down their loan to 50% of original value and more like capital value increases means their loan from 10 years ago is 50% of property value in 2019.

  • Bob Svargis on 02/07/2020 - 09:47
    +7

    I have been in a similar boat, being forced to sell an apartment we bought brand new due to cash flow issues (as part owner/former Director of a business that got into trouble, long and sordid story relating to Director responsibilities/liability/fraud etc).

    Short story was, we had to sell the apartment due to cashflow/having young kids and we lost a lot of money. 8 or so years later and we're back to normal again. It sure sucked but you know what, you'll brush off the dirt and live to fight another day.

    Perhaps also take this opportunity to not throw everything into property - maybe see this as a positive opportunity to drive some diversity into your investment/savings portfolio. I learnt the hard way and so have you, but at least you have your health and sanity!

    At the end of the day, it's just money - if nothing else it's a good learning experience. I realise this may sound harsh, and it sure gave me the sh1ts when people said that to me at the time… and you can't really predict the market. Some say it's going to drop and recent news indicates some across the board drops in property across the capital cities so you probably should take that into account.

    • netjock on 03/07/2020 - 10:04

      Brand new apartments are guaranteed $100k depreciation because you should have got depreciation benefit through tax. Plus there is always new stock at a similar or slightly higher price depressing price of existing stock.

      House investors are looking for capital appreciation of the block. Imagine if 40 floor apartments started popping up on every second block, the stock will increase land prices but apartment prices will be very competitive.

      • Bob Svargis on 03/07/2020 - 13:05

        Absolutely, no argument from me on your points. In my case, we had ours for about 6 or 7 years, roughly, and we were wanting to hang on to it long term… but it just wasn't to be.

        And yes, the tax benefits are good if you have decent cash flow in the first place of course. All it can take is a pregnancy/furlough/cutting back on hours at work/issues at work etc to tip you over the edge.

        The hardest part is letting go and cutting your losses. I sympathise with the OP on this because it's a tough decision. I know that I am still way over-conservative with my finances because of what happened. Anyway, bravo to the OP for making a decision and sticking with it.

  • seedyrom on 02/07/2020 - 09:53
    +4

    My wife bought her unit for $310k and sold for $255k.

    This was in the early 2000’s. We are fine now. Don’t over think it, and try not to let is get to you.

    You do what’s right for you at the time.

    Take it easy.

    • Ghost47 on 02/07/2020 - 17:57

      Out of curiosity how long did it take you guys to climb out of that hole? And by "fine" do you mean you've made up the loss or you've made up the loss and then some?

      • seedyrom on 02/07/2020 - 20:30
        +3

        I had a million dollars of debt when I was 29.
        I had a million dollars in cash when I was 39.

        I was earning less than $80k till my latter 30s. So was my wife.

        I never denied myself toys/gadgets/phones and spent a fortune modifying my car etc.

        I was absolutely broke at one point, making mortgage repayments with Cash advances from my credit card, to tide me over till pay day. Broke, with four mortgages… sounds strange. Did a fire sale on all the properties except our house.

        Won’t go in to all the details … but time fixes everything. Get yourself into a comfortable position, and plug away.

        And don’t measure yourself against others.

        • serpserpserp on 02/07/2020 - 20:39
          +1

          I had a million dollars of debt when I was 29.
          I had a million dollars in cash when I was 39.

          So either a windfall or you were part of the property boom and have now sold your house

          Or crypto?

          • seedyrom on 02/07/2020 - 21:02
            +1

            @serpserpserp: https://www.realestate.com.au/sold/property-house-nsw-erming…

            10 years of capital growth on primary residence.

            For a number of years I held the title of the most expensive house in my suburb (at $620k). That figure by today’s standards seems minuscule to what people are being asked to service.

            • serpserpserp on 03/07/2020 - 20:44

              @seedyrom:

              10 years of capital growth on primary residence.

              So you profited from the property boom. No shame in that. But that sort of property value growth won't be seen for probably another 15-20 years.

              • seedyrom on 03/07/2020 - 23:11

                @serpserpserp: You sound like me. I said the same thing 5 years in to my mortgage. I actually had a falling out with a mate. He claimed property prices double every 7-10 years. I said that isn’t reflective of the future. There’s no way the average wage with its minimal increases can support such doubling of house prices.
                We had a fight, and grew apart based on this. I thought he was an idiot. I was wrong.
                My place doubled in value in 9.5 years.

                I wrote my father an email after 8 years of payments, lamenting that property investment isn’t the Magic bullet he thought it was. I’d mapped out every cost in servicing the mortgage (interest paid, fees, duties), and the market value of my house was well below what I’d “invested” in it.

                But then the mainland Chinese boom happened. I cashed in the chips. I sold in Dec 2014, thinking it was a bubble. The bubble kept rising, but I still did okay.

                I was actually doing really well for a while.
                If OP wants to see some pain, he can look at some of my holdings after COVID-19 HIT.
                https://imgur.com/a/w5ToWDb

        • Ghost47 on 02/07/2020 - 21:14

          Gee, you said you wouldn't go into details but that was far more than I was expecting. A simple figure in years would have sufficed and whether or not by "fine" you meant break even or had more money than you started. Thanks for the reply though.

          • netjock on 03/07/2020 - 10:07
            +6

            @Ghost47:

            10 years of capital growth on primary residence.

            It isn't cash until you are sell it.

            That $1m doesn't pay interest.

            $1m loan even at 3% and straight line calculation he would have paid $300k in interest over 10 years non tax deductible. So his got $700k if that.

            If their combined income is $160k in their late 30s, they wouldn't have been able to get a $1m loan at 29.

            On the internet anything is possible until you do the math.

            • Ghost47 on 03/07/2020 - 13:56

              @netjock: Hmm true, it's not very accurate to say $1 mil in cash if your house is worth $1 mil. Didn't read his second comment, took the first one on face value.

              • netjock on 03/07/2020 - 14:37
                +1

                @Ghost47: Don't worry mate. I'm just trying to put some perspective that some claims don't stack up.

                People seem to over estimate their own abilities (common bias) rather than attributing the responsibility where it belongs. All their neighbour's houses went up to. If you sold, after fees you can't buy the same property because the stamp duty itself would price you out.

                • Ghost47 on 03/07/2020 - 15:38

                  @netjock: Yeah, logical points.

                  • netjock on 03/07/2020 - 16:07
                    +1

                    @Ghost47: It is simplistic claims of easy profits that get people into paying more and more for property believing there is this mythical big pay off and you'll be sitting on a mountain of money.

                    You will be sitting on a mountain of money that you might not be able to do much with.

                    There is probably a lot of landlords who are taking 50% cuts in retirement. If you could get $50k a year in retirement from rental income with zero mortgage (lets assume 2 properties). 2 properties means you might actually have more than $1m in assets therefore no pension entitlement. Suddenly you're living on $25k per couple. You are royally stuffed. Worst part is the drop in property value won't show immediately so you can't go to centrelink for benefits.

                    If my $1m share portfolio lost 20% overnight I'll take a print out to centrelink to ask for part pension and I might still be getting 50% normal dividends. (I am not retired and won't have $1m but it is a demo)

                    • Ghost47 on 03/07/2020 - 19:59

                      @netjock: Good information. I wonder what property investors would rebut this with?

                      • serpserpserp on 03/07/2020 - 20:55

                        @Ghost47:

                        Good information. I wonder what property investors would rebut this with?

                        They'd say stuff like "just make sure you have more properties before you retire".

                        All property investor answers are "just own more property".

                    • serpserpserp on 03/07/2020 - 20:52

                      @netjock:

                      You will be sitting on a mountain of money that you might not be able to do much with.

                      You can do so much with it. If you are willing to change your lifestyle.

                      I know someone that lived in a beautiful but run down house in a rich suburb most of their lives. They sold it because they wanted to change their lifestyle and have some cash to live. But in the end all they did was "downsize" to an even more exclusive suburb and renovated that property. So they spent all their windfalls on a much smaller house which is nicely renovated but won't turn anyones head.

                      If they had moved to the country or just rented the rest of their lives in a nice suburb they'd have so much cash to burn they could have lived like kings (they were retired when they did all this btw).

                      TLDR - Some people are boring and can't see a path to a better life even if they have the means in their hands.

                      • netjock on 03/07/2020 - 23:31

                        @serpserpserp: Selling up.

                        THEN downsize to high priced suburb with not much money left is not apples vs apples.

                        NEITHER is moving to the country is apples vs apples.

                        I AM saying that you can only release the cash when you sell up and you are left with options which will eat into what you think you are left with.

              • seedyrom on 03/07/2020 - 23:27

                @Ghost47: Don’t listen to netjock. He doesn’t know me, and sounds like an idiot.

                I sold all my property, and had a million in cash before I was 40.

                • Ghost47 on 04/07/2020 - 13:13

                  @seedyrom: I don't want to get into the middle of any OzBargain fights!!! runs away

            • seedyrom on 03/07/2020 - 23:15
              +1

              @netjock: You are wrong.

              But I guess your brilliance at mathematics is also why you are trying to be a big shot on ozbargain, and not a cover story of Personal Investor magazine ;)

              https://imgur.com/a/bii3Iul

              • netjock on 03/07/2020 - 23:27

                @seedyrom: Just because I am not bragging about how much money I got doesn't mean I haven't got money. I just talk frugal not talk look at me, try to live up to me. Why do I need to be a big shot, being a big shot is just being a big target.

                Keeping up with the Jones' is the problem.

                Problem is the math don't lie. You don't see rounded numbers and unsubstantiated claims get man to the moon, it is precise math. Half truths cost lives, like OPs big loss.

                • seedyrom on 03/07/2020 - 23:33

                  @netjock: How bout next time you don’t go making public statements about people which are wrong, or on topics you don’t understand.

                  • netjock on 03/07/2020 - 23:34

                    @seedyrom: You made a public statement and omitted facts, I am just highlighting it isn't possible. You might have $1m cash but it came from somewhere else.

                    • seedyrom on 03/07/2020 - 23:45

                      @netjock: Geez you love doubling down when you’re wrong. Right from the outset I said I had four mortgages, and got rid of three to concentrate on the house.

                      Somehow you’ve concocted some story in your head that we got a $1m loan for a house … even when I posted the address, and also stated that the house cost $620k.

                      I’ve now posted a magazine published article which states how I had two properties by the age of 22.

                      It would sort of make sense how I’d been accumulating properties and mortgages prior to buying my house.

                      I tried to make it easy for you. It mustn’t have been easy enough.

                      Just stop Colombo.

                      • netjock on 04/07/2020 - 00:22

                        @seedyrom: I got onto The Australian about my grand overseas career too but I'm not going to post that up. Neither am I going to post my portfolio balances here.

                        Would you at this moment tell people to pay their mortgage on their credit card / high interest loan? No. Because you're not comparing apples vs apples. You entered at a much lower price in the 2000s.

                        As you also said you had the Asian boom. You could have been just as unlucky it didn't take off. Please don't take that as skill. I bought an apartment in 2005 and it doubled but I am not about to brag about it and put up screenshots or links to the property / value. I haven't been on here telling people to invest in X or Y but consider the risks.

                        To believe the next 10 years will be same as the last 10 years or 20 years is just asking for trouble (OP is up their eyeballs now). It is exactly the property investor courses that have been selling what worked in the last 7 to 14 years will work even with COVID. The last situation similar to COVID was 1918.

                        The fact is most property investors should not be investors at all because they are on pretty low incomes link to article here

                        • seedyrom on 04/07/2020 - 00:34

                          @netjock: Alright, I’m out. All this started cause I wished the guy well, as we had suffered a loss on property, and now we were doing fine.

                          People started asking what “fine” meant … then pencil heads like you start claiming pEoPLe CaNt mAKe mONey LiKe tHaT!!!,!

                          You constantly called me out, saying I was obviously telling mistruths, and I couldn’t claim I had a million dollars if I hadnt sold the house (I had). You have been wrong at every turn, publicly refuting my statements, and every time I provide evidence, you don’t man up and admit you are wrong, but go on the attack saying I am bragging. I reckon you think you win all the arguments you get in to. Here’s a tip … you don’t win, people just stop. Like I am now.

                          Glad your overseas career was grand. Sounds totally relevant to property investment and losses.

                          • netjock on 04/07/2020 - 00:56

                            @seedyrom:

                            People started asking what “fine” meant

                            You mean

                            And by "fine" do you mean you've made up the loss or you've made up the loss and then some?

                            By which you couldn't stop yourself posting figures and how much you were living it up.

                            I'll give you a bit of a demo.

                            If you had bought shares in CSL during the first Greek Eurozone financial crisis in 2010 for about $30 it is now worth about $300 a share. Margin loan would allow 75% leverage. If you wanted to make a million you just needed to have bought 3703 shares at $30 for $111,111 margin loan of $83,333 at 6.5% which is $5k of interest a year. Yes I bought at $32 but I am not posting my trade contract notes or my portfolio size.

                            Or the lower risk option Dow Jones index was around 7k in 2009 and peaked at 27k therefore 3x your money.

                            Glad your overseas career was grand. Sounds relevant

                            I worked for my wealth, I didn't have to squat on some land, wait for the Asians to bail me out and pretend it was skillful on my part.

  • Pufff on 02/07/2020 - 10:07

    I borrowed 20k and invested $40k total about a month before gfc in 2008. Down over 20k before i knew it. Lost over 10k after about 8 years and about 5k in interest on the loan.
    Not as much as you but I was in my early 20s and income was really low.
    I learned a lot from that experience. The main thing is to not dwell on it cause its done and you'll keep second guessing yourself in other areas.
    Also better to focus on your job cause that is the main earner. Obviusly a bad time now but if you are good at anything there will always be demand for it cause people will see that.

  • ihbh on 02/07/2020 - 10:21
    +4

    I don't think I am cut out for the responsibility of being a landlord

    1. This is the wrong focus and reflects a lack of experience, which you'll build up over time.

    2. A professional/experienced real estate investor doesn't own 1 property, but a portfolio of properties to diversify risk. In the short term, the impact of luck can be very significant with just one property as in your case. The 6 year tenant vacated one of my properties due to Covid (didn't negotiate reduction) with proper noticed. I repainted it (20 years since) and installed new blinds and was very fortunate to get 10+% rent increase after first showing with a couple of offers. Two years ago one property nearby took longer to find new tenant and at 10% reduced rent after nearly 20 year tenant vacated. Both properties were affected by local market issues at the time.

    3. They buy near the start of a long term trend and sell or hold towards the end of a long term trend (not time to the days but years is good enough).

    4. They ensure they have sufficient resources to not be a forced seller - real estate is something you want to be able to sell on your terms because the market can be very illiquid for a particular property, and there are substantial transaction costs.

    The last couple of years was not a good time to be buying real estate so you are effectively reversing your decision, so short term is a hit to your wallet but could save a bigger one and lots of sleepless nights longer term.

    Many others could be in your boat, and are just prolonging your situation.

  • payless69 on 02/07/2020 - 10:56
    -1

    In Victoria tenants are urged by the media to use meth. Costs you only 19 grands to conceal or about 200k to clean up!

  • [Deactivated] on 02/07/2020 - 11:30
    -1

    Should've pushed them for rent. They would've been raking in government handouts with kids. Them taking on more risk than they can handle by being up to their nose in credit is their own problem, not yours. You just lost $100k because you couldn't put your emotions aside and fell for the "won't somebody think of the children" ploy.

    • sarahlump on 02/07/2020 - 12:47

      Tennants arent the saving grace for bad decisions dear.

  • Boioioioi on 02/07/2020 - 11:37
    +12

    Hey OP not here to give advice but wanted to say I think you're a good guy. I would've probably done the same. Glad you thought about people and not just money.

    I'm sure the karma will come back and help you succeed in the future. Best of luck

  • OzHunterNSW on 02/07/2020 - 11:46
    +1

    You purchased in expectation of making money without realising that unforeseen factors can completely wipe out this fanciful dream.

    So what if you lost money… this is your gambol. Cripto, gold, cash… but you went for the big one… and lost

    • funnysht on 02/07/2020 - 16:08
      +1

      except..you miss the main point that the government isnt asking you to donate your cripto/gold/cash/shares income, but from income from rental properties, seems fair heh nor havent the gov forced you to hold onto your shares, whilst the gov has forced landlords to hold onto their tenants.

  • echelon6 on 02/07/2020 - 11:49
    +5

    Should've been harder on the tenants, don't listen to their sob stories. Your rights are yours to enforce. Should've reminded them as gently (or harshly) as you feel, that the eviction moriatorium is ending soon, and you have the right to take them to small claims for the full amount. Remind them their cars could be sold. Get the agent to do this if you feel soft about it.

    Also 12k plumbing bill is suspect. Tree roots? Just jet blast every once in a while - will never add to 12k. Plumbers always scare you with "this will happen again in 6 months", but do the maths, how much is a jet blast, even if it happens every 6 months (which it won't, might need it every 2-3 years) it might never add to 12k present value. Plumbers will always want to get the big job - dig trenches and lay new pipe etc, but even then 12k is suspect.

    I think agents will say whatever they need to say to secure a commission. It's always "great time to buy" and "great time to sell" depending on who they're talking to. Can't blame them for feeding their family.

    I think you're a bit of a noob, several mistakes made. But live and learn, what's done is done. I hope you don't give up and learn your lessons and invest again, whether it be property or some other asset class. If you have a give up mentality, you'll be this way forever.

    • mookill on 02/07/2020 - 12:02
      +2

      You sound like such a lovely human.

      Money money money. Mine mine mine.

      • echelon6 on 02/07/2020 - 15:42
        +3

        There are proper channels for charity. I'm absolutely against situations like this one where the OP is most likely a bit on the naive side, believing everything he's told (i.e. the tenants' sob stories, the agent and bank telling him it's the end of times, the plumber telling him his pipes are stuffed), and behaving to the detriment of his own family's needs. He's also struggling himself - why should he take it upon himself to give his tenant concessions? I only replied because I see a bit of my younger self in him and feel sorry for him.

      • CoreArchitect on 02/07/2020 - 12:54
        +3

        lol why? I think you are making some story in your head that's based on some words on an internet forum again. Leave the dude alone - he is allowed to his opinion and you can disagree with it. There is absolutely no need to get abusive because you don't agree with him. Just shows how shallow you actually are.

        IE. Public demonstration of empathy and social justice isn't always the right thing to do.

        • SpendLess on 02/07/2020 - 14:23
          +3

          can the OP send Mookill and Sarahlump the renters details so they can assist them in these hard time
          sound like they are here to support them through their hard time and have unlimited money to throw at them
          Should have let the OP know sooner so he didnt need to sell while you guys paid the rent for them

          • CoreArchitect on 02/07/2020 - 15:12
            +2

            @SpendLess: pfft. Yeah right! These two will not scrape 2 bucks together between them.

            But the losers they are, they will sit back and pass judgement instantly whenever they see something that they thought(or read) incorrectly. At the same time they know nothing about the particulars of the situation of the individual they are judging. It's beyond pathetic really.

            • mookill on 03/07/2020 - 10:21

              @CoreArchitect: Oh the money money money me me me's

              Take off your glasses of the investor and see see see.

              You are just a human, thats all you can be.

          • sarahlump on 02/07/2020 - 17:05
            -1

            @SpendLess: ofc, send them my way

    • p1 ama on 02/07/2020 - 17:34
      +4

      Should've been harder on the tenants, don't listen to their sob stories. Your rights are yours to enforce. Should've reminded them as gently (or harshly) as you feel, that the eviction moriatorium is ending soon, and you have the right to take them to small claims. Remind them their cars could be sold. Get the agent to do this if you feel soft about it.

      The only people you'll impress by being a d!ckhead are the same idiots who buy those YouTube courses from the sales guys who will charge thousands to convince them that doing business is just about being a d!ckhead and acting like an ass.

      Doing business is about being able to build relationships, rapport and connections with other people. No, it doesn't mean you let people walk over you, but it means that sometimes you give a little here so you can take a little there later. When I've dealt with tenants in the past, I try to be kind and generous where possible. I received a call from one of the guys a while ago saying that his wife had wanted to move to another place where the rent was cheaper, but he convinced her to stay because I'd always treated them well, their issues were always handled professionally and he let me know that he trusted me. That (plus many other experienced, in many other areas of business) taught me personally that when you're somebody people want to work with, you'll find success.

      Being a d!ckhead might get you places in the short run, but you'll just get burned later on. The animosity between tenants and landlords have always been questionable. The truth is that we've just had an excess of property space supply, so landlords have become more emboldened to be harsher to tenants, but the market is wild and could easily one day shift to one where landlords are fighting over tenants.

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