[back*again]

After some opinions on this, I've taken all figures out.

We own an investment property in a mining town (obviously this is a high risk investment). Rents were sky-rocketing up until a couple of months ago. We have made other financial commitments with the assumption we would be receiving at least $AA/week in rent. It would appear now this isn't going to happen.

The housing market in this town tends to fall quickly, and rise just as quick. After the GFC hit it was less than 12mnths before it was booming again. Things affecting the price of housing at the moment; over supply of houses, local industrial action and employers capping the rent subsidy to employees (the rent is quite large, just about every one in town is provided housing by their employers). I don't know how long this could last for, or how low prices can go. I have enough savings for about 12mnths, if prices don't come back up by then, we're in trouble.

We put the house on the market, although it isn't peak time. While I do believe prices will come back quite quickly, I don't believe they will sky rocket as much as they did before. I ran some figures, we need $x amount to sell the house, pay off the mortgage, pay the REA, and cover the expenses the high rent was going to cover. Or we need $y amount to cover all that, plus buy another IP somewhere more stable. The REA initially told us she could get $20k more than $y, but called yesterday with bad news. At this point it doesn't look like we could get $y, although $x is still achievable.

DH doesn't want to sell an IP and not be able to buy another, as that would be moving backwards. I tend to agree, but in the back of my mind; what if houses prices fall badly and we're stuck with a house that's not worth a cent, thinking we could have walked away with enough to cover all our debts and financial obligations?

So, would you hold out for $y, or settle for $x?

This post has been edited by back*again: 19/04/2012, 10:17 AM

[threelittlegems]

I don't ever believe in selling an IP and not buying another one.

I also don't really like mining towns as investments because they are volatile.

If you have a plan of where to reinvest the money, and you can get out without losing money I would consider it.

But not if you don't have a plan on where to reinvest the money to achieve your goals.

I will also send you a PM with something to think about.

[back*again]

I also don't really like mining towns as investments because they are volatile

Not really the point, but the house was bought to live in years ago when we moved out here. After we moved out of the house we thought we might as well take advantage of the high rents for a few years before selling.....now just have to decide when to sell.

If you have a plan of where to reinvest the money, and you can get out without losing money I would consider it.

But not if you don't have a plan on where to reinvest the money to achieve your goals.

Yes, if I got enough money to buy another house, I do have a plan on what to do with the money. However, as I said above, it doesn't look like I can sell it for enough money to buy another place. I can get out of it debt-free though, just wondering if I should take that option.

[Ruffles]

Have you factored in Capital Gains tax? If you are making a large profit, it may be a considerable amount which, when combined with the stamp duty of buying a new property, may make it worth holding on until prices go up?

[trishalishous]

personally if this town is fairly cyclical Id wait until prices went higher then sell, to cover costs and buy another investment properties.

[TwiceTheWoman]

Be honest with your appraisal of the situation - what are the chances of rental demand going up?
As above, don't forget capital gains tax when you sell + stamp duty when you buy.
Although I'm not wild about investing in flats or units/apartments, it may be worth your while picking one up close to a major CBD, with as low a number on the block as possible - that's if your cash will allow.

Try to get out of debt (bravo if you are!). We're holding our breath over Spain and continue to watch China. Luckily China's demand for our commodities, helps keep our economy buoyant.

[daisydo]

Difficult decision OP.

Depends on who you talk to about the real estate values. Some say up and others say down. If only we had that crystal ball!

Try to get out of debt (bravo if you are!). We're holding our breath over Spain and continue to watch China. Luckily China's demand for our commodities, helps keep our economy buoyant.

My thoughts were that the Chinese economy is slowing. I am sure I read something about that a couple of weeks ago in the Southern Chinese paper.

[Guest_Retro_Mumma_*]

Depends on what mining industry and what town.

[howdoyoudoit]

My hubby sells to the mining industry and overall they are on a downturn. Not a boom right now and a lot of companies working staff on min hrs etc.... hard choice but I wouldnt have an investment prop in a mining town,way too volatile

[TwiceTheWoman]

My thoughts were that the Chinese economy is slowing. I am sure I read something about that a couple of weeks ago in the Southern Chinese paper.

^^^We're watching overseas postings closely as we trade our own super fund and are currently heavily in the international market. The GFC isn't over yet. We are not prepared to be complacent and are concerned over Spain with 50% unemployed under 25yo.
It still may pitch over to us with the domino affect coming from other countries.
.........all hinged on the Glass Stegals Act being repealed. I recall watching the pomp and ceremony and thinking what the heck are they applauding for? This is not good! Hence sub-prime collapse - guaranteed inevitable disaster. Yadda, yadda.
I'm telling all my children (all in late 20's), stay out of debt for now, save as much as possible and put into high yield accounts.