Renting out or selling

[Thrawn]

I've got a house currently undergoing renovations that I'm thinking of either selling or renting out in the next month or two. The property is in Queensland

I'd prefer to sell it since the future is now looking a bit scary, but the prices has probably already dropped so much that its too late.

What I'm wondering is, is it feasible to sign a contract with a selling agent to sell.. and then a month later change your mind and have it rented out through a different agency ?

I believe the common selling agent contracts is for like 3 months. Does this restrict you from renting out the property within that time frame ? I reckon if I can't sell it in the 1st month, it'd never sell.. and I'm not keen on having it vacant for 2 months after that either.

 

[LynnH]

Thrawn

It is feasible to sign a contract of sale, then change your mind and take it off the market - after all, it is your property, but bear in mind that if you sell it privately during the agency period you will probably have to pay commission . Check your contract of sale thoroughly (I recommend that you have a solicitor examine it) to make sure that you can switch to a different agent to manage the rental. It shouldn't be a problem, but I have heard of one instance where the selling agent had a clause in the contract covering the rental aspect, too.

Cheers
LynnH

 

[alexlee]

I'm seeing a lot of contradicting things in this post:

1) If I can't sell it in the 1st month, it'd never sell - that doesn't make sense. You drop the price low enough, it WILL sell. But how low do you want to go?

2) The future is looking a bit scary - it's probably too late - future until when? The next year or two? Do you believe it'll keep dropping for 10, 20 years?
Alex

 

[Thrawn]

I'm seeing a lot of contradicting things in this post:

1) If I can't sell it in the 1st month, it'd never sell - that doesn't make sense. You drop the price low enough, it WILL sell. But how low do you want to go?

Its kinda like shares, I guess.. for any given share.. its worth a certain value to you based on the level of current earnings and potential future earnings. If the current market value of the share is greater than what you currently values the share, then you sell.

With property, its more tricky with high transaction costs but the principle is the same. The only way to determine the "market value" of the property is to put it on the market. I feel that perhaps the current "market value" of the property is higher than what I currently values the property at. But if I am wrong, there's no point on leaving it on the market any longer than a month, as most interested buyers would've disappeared by then.

2) The future is looking a bit scary - it's probably too late - future until when? The next year or two? Do you believe it'll keep dropping for 10, 20 years?
Alex

For up to the next 5 years. Basically, I feel like there's a potentially large down-side risk in the next few years, whereas there's virtually nil upside potential by holding onto the property (at the price I would like to sell). Keep in mind that no CG equals a loss for investment properties..

Look at it this way. This is my estimates for next 5 years, based on what I feel is the current market value of the property.

greater than 20% CG (profits) - 5% probability
up to 20% CG (rough break-event point) - 20% probability
+- 5% CG (a slight running loss) - 50% probability
up to -20% CG (loss) - 20% probability
greater than -20% CG (huge loss) - 5% probability

Under the above condition, you'd better off selling now and buy in 5 years again. I also realize that property has natural upside potential (location scarcity, net population growth, income growth, etc) but I don't believe the next 5 years will be normal.

Now, if my estimate in current market value are off (say its 10% lower than thought), it changes the calculation a fair bit. Basically means that we're in a different part of the cycle than initially assumed. In which case its worthwhile just to keep the property as a major part of the "risk probability of loss" has already happened. So therefore greater upside potential and lesser downside potential.