Making the decision to sell your investment property needs a lot of consideration. If you want to recycle the equity to buy another property the costs of selling can far outweigh paying a rental property manager’s fee or paying a tradie for some maintenance work.
Stamp duty on the new property especially is a biggie. Then there’s capital gains tax from the original property and legal fees for both selling and buying. It could take years to recoup the losses.
But there are some circumstances when it can be better to sell. While there are more reasons for selling than listed here, these are three common scenarios:
1. Too much maintenance
Quality of life is important and if you’re continuously fretting about making mortgage payments, finding the money to replace a leaky bathroom or dealing with annoying tenants, it might be time to sell your investment property.
2. It’s not performing well
Investing in property is a long term venture and markets can fluctuate, but if you’ve held your rental property for over ten years and you’re not experiencing a decent rental yield or capital growth, then it could be time to cut your losses and invest elsewhere.
3. You want to free up capital
Property isn’t a liquid asset, so if you need capital for other ventures, whether business or pleasure, you’ll need to sell it. Ideally you want to hold onto an investment property for 7-10 years in city markets, and longer in regional areas, but if you’re an older investor then you have less time on your side than a younger investor.
If you’ve decided you definitely want to sell your investment property, the next decision you have to make is how.
Find a quality agent to sell your property for top dollar
Getting top dollar on your investment property can be the difference between selecting a good agent and a mediocre agent. Do your homework on agents, research at least three or four that are recommended from friends and colleagues or sign up with a lead generation app like Bricks+Agent that can narrow the field.
Always look at performance-based results - a large amount of ‘for sale’ signs, for instance, doesn’t always mean an agent is selling a lot, it can just mean they’re active.
Setting the right price
Setting the right price is key in selling your investment property. A good agent will have knowledge of the market based on experience and previous sales, so you should definitely take this into account. But you should also do your own research by checking the sale prices of properties that have been selling in the neighbourhood
Be aware of tenant laws and regulations
If you’re selling an investment property that’s tenanted there are some pros and cons to take into account and tenancy laws to be aware of.
Pros of selling with a tenant:
- You’ll receive rent during the selling process
- It will attract other investors as they’ll receive rental income immediately.
Cons of selling with a tenant:
- You need to give the tenant notice when holding open for inspections
- You’re relying on the tenant to keep it tidy and presentable.
Tenants are entitled to stay for the duration of their contract but the minimum notice to leave period is different across Australian states. In NSW for example, the tenant has to be notified a minimum of 30 days beforehand that the property has been sold and they need to vacate after their fixed term ends. In Victoria this minimum notice period is 60 days.
We hope this article sheds some light on the issue of selling an investment property, which can be complex. For more insights on property investment sign up to our monthly newsletter below!