If you sell an investment property too early, you could miss out on capital growth. On the other hand, if you sell too late, you might end up selling your property at a loss or missing valuable opportunities for better investments.
Unfortunately, the property market is notoriously difficult to predict at the best of times. Still, there are some key indicators that can help you decide when the time is ripe to sell an investment property.
As an investor, you also need to consider your unique financial situation. Consult with a financial advisor, family member or broker to ensure you sell your property at the ideal time.
So, when should you sell an investment property at a time that is right for you? Here are some scenarios where it might be beneficial for you to sell.
Stagnant property prices
If your property investment strategy focuses around seeking capital growth over the short to medium term, yet growth is slow, you might want to sell your investment.
Holding onto an underperforming property may actually end up costing money. The danger lies in waiting too long for the ideal time to sell. Investors that continue to look for the perfect time to sell can get stuck in a waiting game, causing them to lose money.
You might want to sell to free up funds for other business ventures or investment opportunities. If you’re not currently achieving a good return on investment on your investment property, you might want to sell it to purchase property with a better rental yield. For instance, perhaps the investment property you have purchased is an older property which is becoming very expensive to maintain.
If you have found an opportunity you are certain will provide a better return, you may want to seize it. However, if you’re buying a new investment property you should factor in the costs involved in selling and buying again.
Retirement is one of the most common reasons investors might want to sell an investment property. When doing so, retirees may even be able to save on tax by investing a portion of the proceeds of the sale into their super fund.
If you are doing this, however, be aware that selling your investment property after retiring may contribute towards your income and affect your pension entitlements.
Freeing up funds
While it may not be ideal to sell your property to free up cash, for some, this is essential, especially when life throws you curve balls. If you do need to free up funds, keep in mind that the selling process may take some time. It may also come at a cost, once you factor in capital gains taxes (CGT), any potential losses and selling fees.
You may also wish to consolidate a more extensive property portfolio to enjoy the fruits of your labours. For instance, if you can only afford to own 2 to 3 investment properties, you’ll want to ensure that you’re holding onto the most lucrative ones. It may be worthwhile to sell an investment property in your portfolio that isn’t performing as well as others.
To maximise the amount of money you can make when selling your property, consider refurbishing or renovating your property.
To do this, look for ways you can make a profit from your property. For instance, you could convert a spare room into an office, or add a new kitchen or bathroom.
Even smaller cosmetic changes like a new coat of paint, new floorboards or new built-in cupboards can increase the value of your property significantly. With a little research and some hard work on your behalf, you can even make these modifications yourself at a relatively low cost.
At the end of the day, deciding whether or not to sell an investment property is a big decision. This decision should not be made lightly, and should only be made by you.
Importantly, your decision also needs to take into consideration your unique circumstances and the tax repercussions of selling as well as considering your financial position and what you’re looking to achieve.
If you’d like to understand how much your investment property may be worth, seek advice from a real estate agent. Our agents have a great deal of experience selling and pricing property in the Sydney area. They will be able to provide you with an accurate estimation of how much your property may be worth.
It may also be worth conducting research and attending auctions. This will allow you to see how much similar properties are selling for in your area.