When it comes to property investment, the big question often looms: Should you sell? While the allure of cashing in on your investment can be tempting, selling your property may not always be the wisest choice. Before making any hasty decisions, it’s essential to weigh the potential benefits against the long-term consequences. In this blog, we’ll explore whether selling your property investment is a savvy move or if holding onto it could yield greater rewards.
Before we dive into the question of whether you should ever sell your property investment, take a moment to listen to our insightful episode featuring Cate Bakos and Pete Wargent. These two property investment heavyweights share their invaluable knowledge and experiences, guiding you through the nuances of long-term property success. From strategic buying to understanding when selling might actually be beneficial, this conversation is packed with expert advice you won’t want to miss.
Watch the full episode here:
The Case for Holding
What is the power of compound growth?
One of the most compelling reasons to hold onto your property investment is the power of compound growth. Over time, property values tend to increase, often significantly Cate Bakos and Pete Wargent, seasoned property investors and experts, emphasise that the longer you hold onto a property, the more you stand to gain. Property markets naturally experience cycles, and while there may be fluctuations in the short term, history shows that well-chosen properties appreciate in value over decades.
Minimising Transaction Costs
Selling a property isn’t just about pocketing the difference between your purchase price and the current market value. Transaction costs can eat into your profits. These costs include agent fees, capital gains tax, and other associated selling expenses. Pete Wargent points out that these costs can easily erode a significant portion of your gains, making the decision to sell less attractive. By holding onto your property, you avoid these immediate costs and allow your investment to continue growing.
Case Studies in Long-Term Holding
Cate Bakos shares personal examples from her own property portfolio, where holding properties for over two decades led to substantial returns. For instance, properties she purchased in regional South Australia 20 years ago, initially valued at around $72,000, have seen annual growth rates between 5.3% and 5.5%. Despite not being high-value properties initially, time and compound growth have turned them into rewarding investments. The lesson here? Sometimes, patience truly pays off.
When Selling Might Make Sense
Strategic Reasons to Sell
While holding is often beneficial, there are situations where selling can be a strategic move. If you can redeploy the capital from your property sale into higher-yielding investments or if you’re looking to shift your portfolio towards more income-producing assets, selling might make sense. Cate advises that selling during advantageous tax periods, such as in retirement, can also be beneficial, provided you’ve sought out great advice.
Risk Management Considerations
There are also scenarios where holding a property might not be the best option. For instance, if a property requires significant maintenance or has fundamental issues that make it a drain on your finances, selling could be a prudent decision. Pete Wargent notes that in some cases, cutting your losses and moving on is the best course of action, particularly if the property is unlikely to recover or provide the returns you anticipated.
The Role of Property Planning
The Importance of Strategy
Property investment isn’t just about buying and selling; it’s about having a strategy. Cate and Pete stress the importance of property planning to navigate the complexities of when to hold and when to sell. A well-thought-out property plan can help you avoid the pitfalls of emotional decision-making and keep your investments aligned with your long-term financial goals.
Tools and Resources for Investors
To make informed decisions, it’s crucial to use the right tools and resources. Borrowing capacity calculators, property planning services, and consulting with experienced mortgage brokers can give you a clear picture of your financial situation and help you map out a strategic investment plan. At Atelier Wealth, we offer personalised advice and tools to ensure you make the best decisions for your portfolio.
Common Pitfalls in Property Investment
The Dangers of Over-Renovation
Many investors fall into the trap of over-renovating, believing that every dollar spent will add more value to the property. However, as Cate Bakos warns, not every renovation will provide a return on investment. It’s crucial to understand the real value added by your renovations and avoid overcapitalising on your property. Often, investors might find that their renovation efforts did not significantly increase the property’s value, resulting in wasted time and money.
Avoiding Buyer’s Remorse
Poor property purchases can haunt investors, especially if those decisions were made without proper planning or advice. A common scenario involves buying off-the-plan properties during boom periods, only to find that the property is worth less than the purchase price several years later. It’s important to get good advice and make informed decisions to avoid this kind of buyer’s remorse. If you’ve made a poor investment, it’s essential to learn from the experience and adjust your strategy moving forward.
When it comes to property investment, the decision to sell should never be taken lightly. While there are valid reasons to consider selling, the benefits of holding onto a well-chosen property often outweigh the short-term gains of selling. By focusing on long-term growth, minimising transaction costs, and utilising strategic property planning, you can ensure that your investments continue to work for you over time.
Are you contemplating whether to sell your property investment or hold onto it for the long term? At Atelier Wealth, we can help you navigate these decisions with expert advice and tailored property planning services. We also highly recommend checking out The Buy Right Approach to Property Investing by Cate Bakos and Pete Wargent for deeper insights into successful property investment strategies. Reach out to us today to discuss your investment strategy and ensure your portfolio is set up for long-term success.
