Jamie is struggling to sell a dud investment property, but there’s ...
No easy way out of this ‘hole’
Q
What do we need to do with prop-
erty that isn’t selling, even with a
price drop to match market condi-
tions? We purchased the property in 2009
through our family trust. The purchase
was for three new three-bedroom, two-
bathroom townhouses on a DA-approved
lot in the town of Dalby, in south-east
Queensland. The townhouses had renters
signed up for 12 months and options to
extend the rental agreement. Then the
wheels started to fall off.
As with most property around that time
the rental returns were great, but with the
downturn off the GFC and the end of the
mining boom the returns have dropped.
We currently are lucky to have them all
rented on six-year leases.
We have had the property on the market
for two years, with one inquiry. With
the ongoing cost of holding property and
lower rental return, it’s now cost us thou-sands yearly with rates, loan repayments
and general running costs.
Could you please give some insight into
what steps to take to get us out of the hole
and on the right track?Hi, Jamie. Unfortunately, neither my decades
of experience with money nor my rather
flawed crystal ball are going to help you.
The lesson is one you already know. Buying
property in one location, meaning you have
significant risk exposure to one area and, in
this case, one industry, is just not the way
to go. You have done the only thing you can,
which is drop your asking price. The other pos-
sibility, of course, is some sort of employment
revival in the Dalby area.
The one bright piece of news is you have
them rented for six years – that is positive for
potential buyers and helps cover your running
costs. I really wish I could pull a rabbit out of
a hat for you, but there is no magic here.Linda’s $140k inheritance is a ...
Fantastic chance to slash loan
Q
We have received a $140,000
inheritance. We have two kids,
aged 12 and 9, a mortgage of
$340,000 on a four-bedroom house in
Sydney’s Sutherland Shire and we earn
about $100,000 in combined income. We
have no other loans except our mortgage
and a $5000 credit card debt. We were
thinking of investing in a mortgage trust
fund with $100,000 of the inheritance or
paying this amount onto our mortgage.
Any ideas?This is a very timely inheritance, Linda. With
two kids life is not cheap. First up is the veryobvious advice to clear the credit card. That
will leave $135,000. Personally I would not be
investing this money anywhere but your own
mortgage. An investment such as a mortgage
trust fund is not without risk. Many of these
have collapsed over the decades. Sure, these
would have been the higher-risk, higher-return
trusts, but this is such a wonderful opportuni-
ty to dramatically reduce your mortgage
I would not miss it.
Chat to your lender about whether you
can do this with an offset account, where the
money “offsets” your mortgage but is acces-
sible to you. Any investment you make will
earn taxable income, but reducing mortgageeffec-
tively
gives you
an earn-
ing rate
equivalent
to your
mortgage
interestrate.
I noteyou
are planningtodo
this with$100,000.
Do use the $35,000 left after paying off your
card debt wisely, because opportunities like
this to reduce debt are rare.