Ask Paul: Should we sell investment property at a loss?
Q. I am 38 and work in an international fly in, fly out job earning $100,000pa plus super (paid in US dollars). My partner is 36 and earns $70,000pa working fly-in, fly-out in Western Australia.
We have a two-year-old son. We have combined super of $120,000 and savings of $30,000.
My partner bought an investment property in Cable Beach, Broome, at the peak of the mining boom.
The mortgage is $420,000 while the property value has fallen to around $350,000.
Tenants are difficult to secure so each year the property is untenanted for six to eight weeks and maintenance is expensive given the remote location.
We'd like to buy a home in Perth, and build up an investment portfolio and a nest egg for our son's education.
Should we hold on to the Broome property in the hopes the market will improve or sell it at a loss? - Sarah
A. Yikes! This is one question where I will have to run for cover.
The truth, Sarah, is that I know zero about the Broome property market, apart for having enjoyed the Cable Beach Resort a couple of times.
It all gets down to population growth. If Broome grows, which I suspect it will as our overall population grows, your property should do OK. But obviously mining has a strong say in this.
So you really do need to seek local advice. But if your future is in Perth my gut feel is that an investment property in Broome is not really the best of ideas.
You have two good incomes.
If you chose to sell at a loss it is not pleasant but if the property is not likely to improve in value you may well be better off taking a hit and moving on.