Wednesday, 5 December 2012

Real Estate - asset or liability?

Our investment rental property is still vacant (the last tenants moved out at the beginning of July), and we also haven't had any realistic offers to buy the property, although its now been on the market for nearly two months. Meanwhile the lack of rental income has meant a cashflow shortfall of about $2,000 each month, which I'm having to meet by drawing down on our 'portfolio loan'. It is times like this, when real estate values are stagnant, if not declining, and mortgage interest charges are producing a negative cashflow, that real estate seems more like a "liability" than an "asset".

Depending on whether or not we get a new tenant, or get a good offer to buy the property, we may either continue to rent it out for a couple more years (while we decide whether or not to build a new house on the block and move there ourselves), or else just sell it and use the net proceeds to pay off the mortage on our current home.

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2 comments:

Anonymous said...

With rental vacancies under 2% in Sydney your property shouldn't be vacant for so long? Maybe drop the rent a bit or offer a rent free period?

Thomas Watson said...

An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket.