Woolston investment dilemma

Question from tamney updated on 11th August 2017:

I have a rental property in Woolston. It is an old state house that was built in 1960. It needs some work done to it to get it completed which we can't afford to do as the bank won't lend us any money because of our LVR which is 84.19%.

The house is in a Trust as well so I can't negatively gear it. I've approached the SBS Bank for a loan which was declined because we are already over the maximum LVR. There are many factors working against us including the flat housing market in Christchurch which makes it difficult to sell right now.

Who can I get unbiased advice from in Christchurch as to whether we should just cut our losses and run or should we hold on to the property?

My thoughts were that with the rebuild in the CBD that the Woolston area may be in demand in the next six years or so once people start moving back into the CBD for work. Hence we should see property values go up again.

Our expert Kris Pedersen responded:

This is a hard one. From what you have said you are getting caught by the fact that the finance market has tightened as well as by that over the 80% LVR level - which lenders tend to have tightened even further.

I am not an expert in the Christchurch market. However, my understanding is that prices and rents overall are slipping a bit from oversupply. Understand that this is a very generic comment and there will be parts and also particular property types which will out perform the above comment.

You also need to take into consideration exit costs to get out and if the market has come back a bit already you need to ascertain how much you have missed out on already. I remember one of my first mentors saying something along the lines of: "Picking the top and bottom of markets is a fools game, its time in the market that matters." While I don't always agree with that comment you always need to take it back to your situation.

Based off what you have stated you HAVE to sell. So, if that is the case, do so but make sure you reallocate the cash well elsewhere. Best Wishes!

Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz

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