Make The Right Call On Holding Or Selling Your Investment Property

From time to time, every investor has to decide whether to hold onto a property or sell it. This decision often arises when market conditions change, financial goals shift, or personal circumstances evolve. By considering factors like market trends, cashflow, and your investment strategy, you can make an informed choice that best supports your long-term goals.

In this blog, we’ll walk you through the essential factors to consider when deciding whether to hold or sell your investment property.

List Of Reasons To Hold Your Investment Property

Market Growth Potential:The property is located in a high-growth area with strong demand, population increases, or future infrastructure projects, signalling long-term capital appreciation.

Positive Cashflow: Your rental income exceeds property expenses, including mortgage payments, maintenance costs, property taxes, and management fees, providing a steady stream of profit.

Long-Term Capital Appreciation: Holding onto the property allows you to benefit from long-term appreciation, especially if market trends indicate rising property values over time.

Tax Benefits (Depreciation and Deductions): As long as you hold the property, you can continue claiming tax deductions, including depreciation on the property, reducing your taxable income and making the investment more profitable.

Stable Financial Situation: You have solid financial standing with no urgent need for liquidity. Holding allows you to continue building wealth gradually.

Good Portfolio Diversification: The property complements your overall investment portfolio, providing balance and diversification. Holding the property contributes to maintaining or improving your risk profile.

Low Vacancy Rates: The property is in a rental market with high demand, resulting in low vacancy rates and consistent rental income, minimising the risk of prolonged vacancies.

Market Timing Uncertainty: Selling in a growing or stable market may cause you to miss future gains, especially if market indicators suggest further appreciation in the near future.

Lower Capital Gains Tax: Holding the property longer, especially beyond a year or specific tax periods, may reduce your capital gains tax liability.

Avoid Selling Costs: By holding, you avoid the transactional costs associated with selling, such as real-estate agent commissions, closing costs, and legal fees, preserving more of your investment.

List Of Reasons To Sell Your Investment Property

Market Decline: Signs of a local or national property market downturn, including oversupply, rising vacancy rates, or economic contraction, may cause property values to drop in the future, making now the best time to sell.

Negative Cashflow: If the property is generating negative cashflow (where expenses consistently exceed rental income), and there is little prospect of future improvement, selling may prevent ongoing financial losses.

Immediate Liquidity Needs: You need access to cash for personal reasons, such as paying off debt, funding new investment opportunities, or covering large expenses, making selling a practical option.

High Maintenance and Repair Costs: Anticipating costly repairs or ongoing high maintenance expenses that could cut into your profits may prompt a sale, particularly if the future return doesn’t justify the ongoing costs.

Maximising Market Gains: If the property is at or near its peak value due to a hot real-estate market, selling now could allow you to capitalise on capital gains before the market cools.

Rebalancing Your Portfolio: You may want to sell to diversify your investment portfolio, shift funds to other asset classes, or reinvest in higher-growth markets or properties with better prospects.

Diminishing Rental Demand: If the property is in an area with weakening rental demand or high vacancy rates, selling could prevent further erosion of rental income or property value.

Tax Planning (Managing Capital Gains Tax): Strategically manage capital gains tax by selling assets in low-income years, using tax-loss harvesting to offset gains, holding investments for over a year for lower tax rates, and anticipating tax law changes to minimise tax liability.

Property-Specific Challenges: Issues like zoning changes, neighbourhood decline, or property-specific problems (e.g., flood risks, difficult tenants) could diminish future returns, making it more prudent to sell.

Personal or Lifestyle Changes: Personal changes, such as retirement, relocation, or changes in financial priorities might require you to liquidate your property investments to align with your new lifestyle or goals.

We’re Here To Provide Expert Help!

Whether you’re looking to hold or sell your investment property, our expert mortgage brokers are ready to guide you through the process. Call us now at 1300 889 743 or complete our free online enquiry form to get started today!