Article By Katy Holliday
Thursday, September 19, 2019

Investment property: Why is it good to sell?

When buying an investment property, the buy and hold strategy is not the only way to manage your property portfolio. There’s a better way.


Why It’s Good to Sell

Property investment is first about maximising profit. After all you aren’t buying a home to live in, you are buying a property that you expect to earn you returns. A Return on Investment (ROI) mindset is important for smart property investors. It will focus your research and how you manage your property portfolio on profit.

Think of the investment property market like the stock market. Price volatility is actually a good thing that allows smart investors to buy low and sell high. But to maximise profit it is important to be open and ready to sell when the time is right.

Monitoring your investment property performance to identify the best time to sell is important.

Here are some reasons why you may choose to sell.

Profit comes early – research tells us that historically most of the capital gains occur in the first 2-3 years of owning a property (when timed right of course). So getting in at the right time is vital, but getting out at the right time is even more important.

Auctioning a property can be a great way to drive up the price on a property in a high demand suburb

Watch out for old wives – There is a generally held belief that house prices double every 8 years. It is just not true. What the research and data does tell us is that the price-growth achieved by houses in Australian capital is 55% every 8 years. There’s a lot of misinformation, opinion and speculation.

Yield is important – If the value of the land is appreciating whilst the value of the building itself is depreciating, holding could cost you money. High upkeep and low rental return can quickly eat into capital gains.

Newton’s 3rd Law – What goes up, must come down. The buy and hold mentality ignores that markets fluctuate and that past performance does not predict the future. Property prices change in accordance with supply and demand so the most scientific way to approach investment decisions is to look at the data currently available, rather than what has gone before. Smart investors know there are opportunities on both the up- and down-sides.

Negative gearing – If your investment property is costing money, you should assess if this is the best tactic for maximising the profit of your portfolio. There’s a better way and positive gearing can bring the benefits of capital gain and rental return.

Holding onto a property may end up costing you money in the long-run

To get ahead in any game, you must be able to think outside of the box. And selling can produce much faster and higher gains for a portfolio rather than blithely relying on the market to deliver gains by sitting on a property waiting for good return. The past does not predict the future.

The 5 TUDI suburb Hot-Spot Indicators are customisable, so that you can specify what’s most important for your investment strategy. Based on this, the TUDI algorithm delivers buy, hold or sell recommendations.