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  • bad investment

    Hi all

    I am not very experienced in property market & on someone's recommendation ended up buying a property in tokoroa in 2008 for 103k which was then valued at 110k.
    Finding tenants is quite hard in that region and I have had bad share of tenants as well and ended up paying mortgage from my pocket for a few months so it didn't feel like an investment from start.
    For past one year its been stable and presently tenanted 140/w. Rent meets the mortgage payments since last year.
    Now I want to sell it off but price has dropped to around 75k so i am not sure if i should sell it & shall i take a loss or shall i just leave it as is thinking it might increase in price one day ?
    or shall i do some reno to uplift the cv but that would mean i am shelling more money from pocket.
    Guess i need advise from experts like you.

  • #2
    That's >9% return on a 75k value. That's looking at the bright side.

    Comment


    • #3
      i have mortgage of 92k at the mo. a return of 140 wk in rent for this property. so 11k equity.
      Last edited by lamborgini; 17-07-2012, 02:55 PM.

      Comment


      • #4
        Do you have the funds to repay the mortgage in full if you did sell for less than you owe?

        Just saw your last edit.
        Current equity is based on current valuation, not what you paid for it.
        Last edited by speights boy; 17-07-2012, 02:59 PM.

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        • #5
          No - thats the tricky bit. Even if this property sell for 75k i would still have to pay the bank 17k on top.
          & i have just started a new family and we are saving for deposit for a 3bdrm house in auckland. So i wont be able to pay 17k at all.
          sticky situation.

          so what would you do in a situation like this ?
          Last edited by lamborgini; 17-07-2012, 03:09 PM.

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          • #6
            Too complicated for me to say definitively what I would do.
            However.

            If you 'can't' repay the bank, then you may be forced to stick with it as you want to protect your credit rating for AKL.
            If you 'could' repay but prefer not to so you can buy in AKL, then you may wish to speak to a mortgage broker.

            Any new borrowings -eg for AKL- will have to take in to account your TOK negative equity.
            Therefore, you may not be able to borrow as much as you assume .

            By speaking to a broker, you are not bringing your file to the top at the bank, who I assume are comfortable still as the mortgage is being paid.

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            • #7
              Well several options:
              1) sell the property at a loss, if the bank allows you to, and take a hit themselves, which I doubt they will do that. Most likely they won't release the mortgage...
              2) bankrupt yourself to escape... this is not a good option as you want good credit rating to buy your home in Auckland
              3) leave as it is and sell later

              Looks like the only way is 3)...

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              • #8
                Cheapest option is probably to keep it.
                Topping it up by $200pm (?) is cheaper than loss of $75K - $92K - $Agents commission.

                Keep in contact with local agents.
                When/if things pickup - flick it off.
                Beware you will probably loose the tenants as soon as you try and sell it.
                It could be worth trying to pay down the loan - though the money is better saved for your PPOR purchase.

                What you really need is a good Aussie spruiker to buy up the area again!
                The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

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                • #9
                  Thanks for advise PC and NovInvestor - Do you think renovation will be a good option ? My view i have been thinking of doing it at the time of selling as oppose to doing it now and loosing on rent. Do you know any cheap renovation that can add value to property ?

                  Comment


                  • #10
                    What are the other houses like around your property? What are the rents like for those, and of those which rennovations are do able.

                    Ie have they got nice gardens and is the increase in rent going to cover costs?

                    Could look at insulation / heating if you tennant has a community services card you can get up to a 60% subsidy from the Govt. But if rents are $140 in your area then it wont make a lot of sense.

                    Comment


                    • #11
                      Paint. Mow. Cut down trees. Garden. Curtains.
                      Cheap easy stuff that you can do yourself first.

                      Then carpets, heat pump, kitchen, bathrooms....

                      What works in Tok?
                      Maybe a hangi pit. Add a ramp into lounge - for easy access for doing motor bike repairs...

                      How well do you know the area & it's wildlife?
                      The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

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                      • #12
                        I agree that keeping it is probably the only viable option at this time.

                        Originally posted by lamborgini View Post
                        Do you think renovation will be a good option ?
                        Are you using a property manager?

                        If so arrange to meet with him at the property (and if not, try and get a local letting agent involved even if you have to pay them) and have a bit of a brainstorm. "If I do a repaint, a new deck, a bit of landscaping, or whatever, how much extra rent would I be able to get". That way you could work out the viability of spending x dollars on the work to get the rent up by y dollars.
                        If the answer is no you would not get any extra rent by getting that work done, then don't do the work.

                        Its all about dollars out and dollars in.

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                        • #13
                          for easy access for doing motor bike repairs...
                          Ha ha only gang houses have ramps....for the wheel chair bound.
                          "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

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                          • #14
                            Why not keep it if the rent covers the mortgage. Property is often a long term investment. It can rise and fall like the sharemarket. Unless you desperately need the money why not sit is out. It will go onto principle and interest one day surely then it will be paying itself off.

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                            • #15
                              Thank you all for your advise. Looks like the consensus is in favour of keeping the property. Certainly dont want to go bankrupt..lol. so i'll keep this IP.
                              Although i have been thinking of buying another property in same area on mortgagee sale for a cheap price and do it up and put it up for rent to cover my loss & once the other property is ready I can sell both. one property profit can cover the loss of other - if you know what i mean. But thats a long shot !!

                              Probably i'll try with a little bit of reno like paint, carpet, etc.. when the current tenant vacates the property.

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