Never sell IP (keep accumulating) vs sell for profit

datto

datto

Is it better to just keep accumulating rental properties (never sell) or should you sell when there is a sizable profit?

If you just keep accumulating properties you never really enjoy your profits. I mean, sure, your equity increases over the years and the banks gladly hand out cash, which you then have to reinvest to repay the bank and therefore claim a tax deduction.

If any of the loaned money is used for private purposes, then whacko, no tax deduction on that portion.

If you sell your investment property there generally is CGT to pay and your investment portfolio gets smaller.

Makes me think..to sell or not to sell?
 
datto said:
Is it better to just keep accumulating rental properties (never sell) or should you sell when there is a sizable profit?

If you just keep accumulating properties you never really enjoy your profits. I mean, sure, your equity increases over the years and the banks gladly hand out cash, which you then have to reinvest to repay the bank and therefore claim a tax deduction.

If any of the loaned money is used for private purposes, then whacko, no tax deduction on that portion.

If you sell your investment property there generally is CGT to pay and your investment portfolio gets smaller.

Makes me think..to sell or not to sell?
Click to expand...

There are a number of variations. Using loaned money means you don't get tax deductions, but you can consider that a price of accessing property appreciation without paying CGT or losing future gains.

You can refinance and use equity to buy higher income investments (shares, commercial, bonds). Over time, these will generate positive cashflow.

There's certainly nothing wrong with selling down to repay loans, since your standard resi IP has relatively low yields. Your portfolio might get smaller, but if it's big enough anyway, that's not a big deal.
 
One of a million questions out there mate, and answer ends up being as clear as mud too - "it depends"

on your circumstances

on your stage in life and investing, still accumulating an asset base or growing a decent existing one or pretty much got nearly all you need (which might still not mean you've finished accumulating but regardless, it coudl affect your decision making

on the individual property, is it worth keepiing or getting rid ?

on how you plan to reap the benefits of the assets, there's more than one way to skin a cat

on the numbers themselves for that particular property and outomces of selling vs. holding it..

So I think getting an idea of the possibilities /options is good to do and then relay that back to your plan or the ideas you have devloped so far, (as clear or unclear as that may be yet)..
 
Keep learning, which is what I assume led you to he stag where you asked the above question.

As you learn more, you develop and later on improve/change your plan.
 
datto said:
Is it better to just keep accumulating rental properties (never sell) or should you sell when there is a sizable profit?

If you just keep accumulating properties you never really enjoy your profits. I mean, sure, your equity increases over the years and the banks gladly hand out cash, which you then have to reinvest to repay the bank and therefore claim a tax deduction.

If any of the loaned money is used for private purposes, then whacko, no tax deduction on that portion.

If you sell your investment property there generally is CGT to pay and your investment portfolio gets smaller.

Makes me think..to sell or not to sell?
Click to expand...

I'm not a fan of selling properties.We do refinance, but it is to purchase more properties, or use in other tax deductible ways.We have several properties,and are marketed differently.
Currently we do have a house that is on a Rent to Own.We don't expect the current tenants to ever buy the property, and will eventually default. They already have, but have provided them with the option to continue for 8 more years.Nothing will change, as they haven't changed their habits.In the meantime, it is improving in value, they have put on a new roof,we are paying down the mortgage, and if they went to finance the property now, chances are a bank would say it isn't worth the purchase price.Until this time, that they walkaway, their rent is already increasing each year at an agreed percentage.If we do have to sell to these tenants we will need to pay CG :mad:
The property we offered last year as a Rent to own, is a bit different.We have the purchase price as being $1.00, and we will be able to depreciate until the selling date, and we will have no CG.We structured it to our benefit, legally.


If your retirement date is 20-30 years off..keep paying P&I mortgages, and then you will have all that rent money to fund your retirement.
Never say never...different properties hold their own advantage.
 
kathryn d said:
If your retirement date is 20-30 years off..keep paying P&I mortgages, and then you will have all that rent money to fund your retirement.
Click to expand...

I would push for interest only loans so that you have lower monthly repayments and the ability to service a greater number of properties, if the aim is to expand the portfolio as fast as possible. Throw any extra cash into an offset.
 
I have been trying to decide this myself lately. I have two properties that I have only purchased in last year or 2. The house I have is in a regional area but the CG is so slow it has hardly changed in 2 years. The rent makes it positive but after rates etc then it goes below and the rent I'm getting is at the max. Also the house is old and I can see a need to spend more money on maintaining it over the next few years.

The other is an apartment, it has already gained a nice CP rise in the 1 year but I have a few reasons to sell this one. Again it gets good rent but after rates & strata it falls well under negative.

I know I can take the money I sell them for and put it to better use, maybe I will be losing a bit on the purchase and selling costs but I think I would rather have the cash I would have from selling to spend on better investments. Then from what I have read the market is on the way down for next few years and of course rising interest rates this year.

The only thing that might stop me is for tax reasons as I can get better tax refunds or pay less and it might be better to hold at least one to have an asset so loans in the future might be easier to get.
 
HomeBuyAU said:
.....
I know I can take the money I sell them for and put it to better use, maybe I will be losing a bit on the purchase and selling costs but I think I would rather have the cash I would have from selling to spend on better investments.
Click to expand...

What are these "better" investments...?
 
Selling for a healthy profit to pay down some debt/invest in other things? I think that's pretty sensible and some diversification always helps. Should have a combination of overseas properties/equities too.
 
Many "schemes" promote the "never sell" philosophy. This is their "get out of jail free" card, as if anyone sells for less than a spectacular profit, any media query is met with the standard "they should not have sold at that time" mantra.

Unlike shares (whose price is listed daily in the newspapers), the only time you will know the TRUE value of your property is when a buyer settles a contract. Valuers can be way out (check the valuations and actual sale prices of the units in the recent TV show "The Block").

When to sell? When you have a better use for the money realised after all expenses (including CGT), whether that be paying down debt, buying a different asset or simply chucking it all in and sailing off around the world.

To paraphrase Kathryn d - Each to their own.
Marg
 
Edmond Dantes said:
What are these "better" investments...?
Click to expand...

I haven't decided what I would do with the money but possible options would be better property, I need some equipment and a car for a new business, savings, stocks, super. Most likely just the business and reinvest in property as I have a better understanding of the market now and where I could profit better.
 
We've been umming and aahing about to sell or keep.

Sell has won. We're going to sell the house, pay down some of the mortgage, buy a bigger car and pick up another subdivisible renovator's nightmare or just some subdivisible land, and very leisurely fix that up. I can point at two renovator's nightmares (one subdivisible) and two blocks that fit the bill and all but one have been for sale for quite some time, so no issues there, spoilt for choice in fact.

I'd rather have few properties and low debt than a huge debt and squillions of houses.
 
I like the points raised. I think either way you go (sell or accumulate) - makes money!

But, if you never sell, I think you can become very very rich (asset wise) over a longer period of time.

You might have a huge debt and squillions of houses, but another housing boom, and all of a sudden you have squillions of dollars in equity!

Nothing should stop this, except for maybe death, divorce or a collapse of the capitalist system.

With heaps of equity you can just keep on borrowing and accumulating IP. Maybe you can siphon some of that liquidity into your back pocket some how.

Im sure it wont be hard to do, eg "hello Mr Real Estate Agent, fancy managing my huge portfolio at say 6%- just give me 2k pw on the sly and its a done deal" - too easy. Mmm, Id never do that - I always declare fully to the commissioner of t !

sorry for the ramblings, but it seems to me that the "never sell option" is sure way to creating huge wealth.
 
Seriously, Im only small fry at the moment, Ive got 3 IP worth about $700K. I have had 5 IP. I have sold 2. I took the sell option, enjoyed the euphoria of having some cash but kinda regret selling.

I regretted selling coz I now feel that another housing boom would have meant more money. Guess Im just plain greedy.
 
datto said:
Seriously, Im only small fry at the moment, Ive got 3 IP worth about $700K. I have had 5 IP. I have sold 2. I took the sell option, enjoyed the euphoria of having some cash but kinda regret selling.

I regretted selling coz I now feel that another housing boom would have meant more money. Guess Im just plain greedy.
Click to expand...

To me, that's not an argument against selling. That's an argument against selling too early, especially when you're still in the accumulation stage.
 
You must log in or register to reply here.

Similar threads

C
  • Poll
Sell vs 'never' selling
2
Replies
34
Views
6K
Deltaberry
D
B
Keep or sell?
Replies
10
Views
2K
ozmale42
O
A
Sell a unit to buy a house or borrow full amount for a house and rent out the unit
Replies
4
Views
2K
wobbycarly
wobbycarly
N
Keep it or sell it??
Replies
5
Views
1K
Terry_w
Terry_w
B
Sell PPOR or convert to IP
Replies
4
Views
2K
Terry_w
Terry_w
Back
Top