Some say, once you have bought a property for an investment, you should never sell it. However, like everything in property investment, or any other types of investing for that matter, there is no hard and fast rule.
When to sell an investment property will vary according to goals, and of course, personal circumstances.
People need to sell for many reasons. For instance, they want to release the capital so they can expand their business or they want to upgrade their family home.
Property investment is usually a long-term investment, but some do sell after a relatively short period of time. They may have bought a rundown property with the sole view of renovating or developing it; they make their profit by adding value to the property rather than waiting for capital growth to occur.
It’s always good to factor an ‘exit strategy’ into your property investment planning, so here are some points to consider:
Would I miss any income return or tax deductible benefits?
Depending on how you’ve geared the property, would you miss these benefits? For instance, even if you’re getting an extra $100 a month, is this money you would miss? If the property is negatively geared, while you wouldn’t be paying costs associated with the property if you sold, you no longer will be able to reduce your taxable income by claiming these costs.
Understand the property cycle
Some see a drop in the market and think they should get out before the market drops further. Remember, the only time a drop in the market is going to affect you is if you need to sell. Property prices generally do pick up. The time to sell may be when the market is hitting top dollar; then you wait until the cycle is going down again to grab yourself a bargain.
Selling costs
Selling a property for, say $50,000 more than you bought it doesn’t necessarily mean you’ll have $50,000 in your back pocket. You will need to factor in associated selling costs such as real estate fees and government tax. Ask yourself whether it is worth you actually selling at this point, or whether it’s worth waiting a few more years.
What return will you get in the future?
Sometimes an area earmarked to be the next big development just doesn’t happen, and while some capital growth has occurred, it may not be as much as you’d hoped. This is when you need to ask yourself whether you really do need to sell now and look for another investment property which will give you better returns in the long run.
Asking yourself these questions will help you decide what works best for your situation. Always speak to a financial specialist and do some number crunching before you rush to sell.
Whether it is giving you points to help you make informed decisions or suggesting ways to improve your property for greater returns, we’re here to help you get the best out of your investment property.
With over 40 years in real estate and property management, our talented team is constantly looking for new and innovative ways to ensure your property investment experience is exceptional.
This is why we are one of Newcastle’s longest established property management companies, so give us a call on 02 4956 9777, send us an email to mail@apnewcastle.com.au or pop into our Cardiff office for a chat.
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