[benji]

Looking for some advice here!

I'm struggling to decide what to do in regards to keeping my house in Aus and renting it out (won't cost me anything to keep but i won't be able to pay off the principal, i'd only be paying the interest)

or

Selling it and using the money to invest and double the interest i can get each year to help pay for travel over the next 3-5 years? Would most likely turn my $8kAUD+ a year return on investment to approx $16kAUD a year.

[Spectrumwalker]

Travel. And you better hurry up. The last plane out of Sydney's almost gone.

[Khan]

It depends on many factors. The main ones are:

1) Do you see yourself wanting to live in that house 10-20 years from now?

2) Real estate prices at that location. Are they projected to rise or fall?

[benji]

(07-22-2017 03:47 AM)Khan Wrote:  

It depends on many factors. The main ones are:

1) Do you see yourself wanting to live in that house 10-20 years from now?

2) Real estate prices at that location. Are they projected to rise or fall?

1) Not really an ideal property to come back to longterm but i guess it is a possibility (It's a pretty small place)

2) Projection would be to rise not fall but the increase is only marginal, most likely the best case scenario would be to increase by about $30-40k over the next 5-7 years imo

[bacon]

What would you be investing the money from the sale of your house in?

[benji]

(07-22-2017 04:10 AM)bacon Wrote:  

What would you be investing the money from the sale of your house in?

I have currently invested in other property developments with the one developer that gives me a really good guaranteed return, so i can double down on that

[bacon]

(07-22-2017 04:20 AM)benji Wrote:  

(07-22-2017 04:10 AM)bacon Wrote:  

What would you be investing the money from the sale of your house in?

I have currently invested in other property developments with the one developer that gives me a really good guaranteed return, so i can double down on that

Writing guaranteed return in conjunction with property development is a bit of red flag to me.

“More money has been lost chasing yields than at the point of a gun.”

If I were you I would talk to a fee based financial adviser who is knowledgeable in real estate. That way you can get a professional opinion on the risks, benefits, tax savings etc of doing this.

[Steelex]

Ok so....

Your 1st solution is to rent out the house under the assumption it won't cost you anything. Wrong. Now I'm not familiar with the law, but do they have property tax? Do they tax money you make as a land lord? Will you be responsible for the a broken water heater or other major appliance? I doubt that renting out the house will cost you net zero... But what do you gain other than retaining the property?

2. You sell the house and make off with the equity if any that you have in it. Now you made money and don't have to worry about it.

Assets make you money, liabilities cost you money.

[Australia Sucks]

Keep the house. Selling it means you will have to pay real estate agents commission plus conveyancing and advertising costs. I am assuming its an owner occupied property otherwise you would pay capital gains tax also if its an investment. Then in the future if you decide to buy a house again you have to pay stamp duty and conveyancing fees.

Also I think the Australian property boom will continue for a long time.

I agree with what Bacon said that loans to property developers are often high risk, far higher risk than the property developers would have you believe. The risk of capital loss in these products is meaningful. I would suggest if you do decide to sell your property dividend paying stocks or an index fund/ETF would be the way to go to generate income.

[benji]

(07-22-2017 04:28 AM)bacon Wrote:  

(07-22-2017 04:20 AM)benji Wrote:  

(07-22-2017 04:10 AM)bacon Wrote:  

What would you be investing the money from the sale of your house in?

I have currently invested in other property developments with the one developer that gives me a really good guaranteed return, so i can double down on that

Writing guaranteed return in conjunction with property development is a bit of red flag to me.

“More money has been lost chasing yields than at the point of a gun.”

If I were you I would talk to a fee based financial adviser who is knowledgeable in real estate. That way you can get a professional opinion on the risks, benefits, tax savings etc of doing this.

That's fine if you think it's risky, i was tempted to not disclose everything but the property developer is a friend of mine and it is guaranteed, it's been ongoing and he has many, many people invested and the company has been going for many years and it has been and will be fine. In respect to that i'm 100% fine with the risk.

[benji]

(07-22-2017 04:59 AM)Steelex Wrote:  

Ok so....

Your 1st solution is to rent out the house under the assumption it won't cost you anything. Wrong. Now I'm not familiar with the law, but do they have property tax? Do they tax money you make as a land lord? Will you be responsible for the a broken water heater or other major appliance? I doubt that renting out the house will cost you net zero... But what do you gain other than retaining the property?

2. You sell the house and make off with the equity if any that you have in it. Now you made money and don't have to worry about it.

Assets make you money, liabilities cost you money.

1) It's not my first rental property. This is my third. Actually through renting it out i would make a slight profit each week about $20-30 taking out all the costs which just gets added to your income, in respect to tax but i also get to depreciate the asset which will help with my income tax. Depreciation would take roughly $7k AUD off my income tax percentage but in actual numbers it will be about $2.5k AUD if i'm in the same tax bracket i am now (which i wont if i move oseas) So it's beneficial to me to keep the property but not that much.

2) Yes but i would have to pay a little capital gains tax, not much but then i can double my return on investment.

[benji]

(07-22-2017 05:19 AM)Australia Sucks Wrote:  

Keep the house. Selling it means you will have to pay real estate agents commission plus conveyancing and advertising costs. I am assuming its an owner occupied property otherwise you would pay capital gains tax also if its an investment. Then in the future if you decide to buy a house again you have to pay stamp duty and conveyancing fees.

Also I think the Australian property boom will continue for a long time.

I agree with what Bacon said that loans to property developers are often high risk, far higher risk than the property developers would have you believe. The risk of capital loss in these products is meaningful. I would suggest if you do decide to sell your property dividend paying stocks or an index fund/ETF would be the way to go to generate income.

It all depends on the type of property and location, some areas have high growth others not much at all and if it's not on that much land the increase isn't as great either longterm. It will rise but not boom as such, where it is. Yes i'll have to pay capital gains tax but that's all been calculated for. Not concerned with the risk in the property development, as per my previous answer, that's not even part of my concern but i can understand people thinking it's risky.

[Matt Warner]

My person opinion is sell if it is in a low growth area especially if your property is not unique in some way. I sold my property in a major Aus city 3 months ago (only got half but that's another story).
I got a real good price BUT the market was getting tougher week by week it was obvious to see. I had something quite special. Don't believe the real estate bull dust you hear in the media.
And for goodness sake don't touch'e the concrete box cookie clutter apartments that are not special. They are absolutely rubbish built and despite what you hear in the media are coming into oversupply. Many will cost's tens of thousands to fix. I am in this industry so know first hand.

Many people make the mistake of thinking a large amount of money going into an investment type shows the underlying fundamental's are strong, or they can ignore the warning signs. Now is the time to be very selective in what you purchase in shares or property.

Anyway I could buy another property tomorrow but I'm cashed up even though interest rates are crap. I'm normally a very positive investor but here in Aus there are just too many signs all isn't well. Good to see you developer mate is doing well. A lot of the guys that have been at it for a long time and successful have cashed up or are in the process of getting out and sitting on the sidelines. I'm not talking about the likes of Mirvac they are sound and do pretty ok stuff.
There are going to be some discounted development sites for sale soon.
So I'm saying at least if you cash up its a long way into a boom and I just don't see the further possible gains been worth the risk.

Things will change for the better, its just a point in the cycle we are in.

Another thing to consider is the peace of mind that comes to having cash in the bank and no debt in times like this.

[samsamsam]

Putting numbers aside, sometimes it is good to just sell it and have one less things to worry about. Especially, if you are going to be far away. And it sounds like you have thin margins if I read that right. 30 to 40 dollars a week?

Look up that 110k investment thread started by Vinny. I posted more about my thoughts on investing.

[Khan]

When it comes to renting, a lot of people usually assume net profit is guaranteed, but that doesn't always have to be the case. The potential stress, as well as the loss of time&money that can result from being forced to deal with an irresponsible tenant can easily outweigh the monthly profits you gain from your rent.

OP, you mentioned this is your third rental property; then you should compare the potential profit from this one with the profits you gain from the other two. If renting this house would result in only a marginal addition to your overall income, then that's a good argument for selling the house instead of renting it. Selling real estate is a big deal and no one can make the decision for you, but in this case the fact that you have more property elsewhere makes it easier.

[lavidaloca]

Maybe you could just work in each area you want to live and do a more long term living type of travel. Given the somewhat limited income that would probably make sense. (With that said in terms of pure passive investment income you are far ahead of most!)

Perhaps try getting some sort of online business going because you already have a passive income level that is livable just not exactly a ton of fun to live on. If you can get to the point where you get a business spitting out another 1,500 a month you'd be laughing.

[benji]

Thanks for the responses guys. I'll try to address any questions

Matt Warner sounds like you know the Aus market well, in regards to my particular property it's size and location mean it will never boom. Has the potential to improve but not by a lot. I agree selling it takes away all the stress, i've had one bad renter in my time and man was it a pain in the ass. I didn't exactly lose any money out of it but it was very stressful.

Samsamsam and Khan yea i'd only be getting an extra $20-30 a week extra once all the cost are taken into account for if i rent it out, my other property was very different to this one in size and potential growth which worked very well for me. I've looked at that thread, i'll have another look, i'm alway looking to diversify and have a little bit of money in different places, it's good to see other peoples ideas and see where people have made there money.

lavidaloca that's exactly what i would like to do, unfortunately as you said i don't have quite enough to live the lifestyle i'd like while traveling and i'm probably stressing out a little making sure once i do make the move i'm not in a position worse then i was living back in Aus. Currently working towards getting an online business up and running and the plan would be just as you describe above.

Feels like a big decision, probably the biggest of my life, not just to sell the property but to move away longterm and travel, that's why i'm trying to get as much info and knowledge as possible before making hopefully the right move.

Thanks again for all the responses

[Thomas the Rhymer]

(07-22-2017 04:20 AM)benji Wrote:  

(07-22-2017 04:10 AM)bacon Wrote:  

What would you be investing the money from the sale of your house in?

I have currently invested in other property developments with the one developer that gives me a really good guaranteed return, so i can double down on that

I thought the Australian housing market is at high risk of bubble popping? (see https://en.wikipedia.org/wiki/Australian...rty_bubble )

Property prices do collapse from time to time, and usually they are completely unexpected.

If the property economy in Australia collapses while you are travelling, would you prefer to be left owning a place or owning a slice of a property development? Or do you think it's time to diversify your investments at this stage, which will make you less dependent on upward property price trends?

[semibaron]

"I'm Selling My House to Buy Litecoin"

https://www.youtube.com/watch?v=5v5y3icu6YY

[sterlingarcher]

Just to share some experience, I'd say keep and travel, for sure.

If you're based in the West, the rental income will cover your living in most travel locations (or at least your accommodation), a huge lump sum of cash is tempting to eat into, and inflation will depreciate it faster than you think.

[Svoboda]

OP mentions rent will only cover the interest and he won't be able to pay off the principal.

That's a strong indication real estate is overpriced.
Especially with current low interest rates.

[RatInTheWoods]

(07-22-2017 05:56 AM)benji Wrote:  

1) It's not my first rental property. This is my third.

If you have two other investment properties than I advise to sell it up and spend it on travel, experience and adventures.

You have to balance life and saving/investment - you can't take a stack of cash with you when you die.

You are doing well to have two investment properties, so it seems some fun is in order!

[RichieP]

http://www.debtdeflation.com/blogs/2017/...-of-cards/

"As a whole, the Aus­tralian econ­omy has grown through a prop­erty bub­ble inflat­ing on top of a min­ing bub­ble, built on top of a com­modi­ties bub­ble, dri­ven by a China bub­ble."

This guy bangs on about bubbles and incorrectly predicted an Aus crash a few years ago, but that point is pretty hard to ignore.

Diversifying would be wise. Some of your wealth in property makes sense... but 100% doesn't sound smart.