Sell??

[tarah]

Hi all,

Would you sell an IP that over 9.5 yrs has averaged $15,777 CG/yr? This is also including the boom in 2003/04. The net profit after the sale will probably be $30,000-$40,000, as I have used the equity in the past to buy others so not sure if it is worth the effort.

I have never sold before and have always been for the 'buy & hold' forever strategy but maybe this money could be put to better use somewhere else! But I never like to miss out on CG! The house is not in the best area of Adelaide and I don't see the value in renovating (the tenants have not really looked after the house and it's quite old).

Do you think it's worth the effort for that sort of profit?

 

[maloo]

Im a fan of never selling.

Does it pay its way? Does it stop you from borrowing more money?

I have a couple of things that I think about selling but they turn a profit so why would you unless the bank wanted a bit hurt money for a business or CIP.

 

[buzzlightyear]

Its really the opportunity cost of the funds invested that is the real issue, not the profit you would be left with after the sale.

If you can take the funds invested and place them elsewhere and get a better return (capital and/or yield) then selling makes sense.

Recently, I was in a similar position. I could sell a property, held for ~7 years that would net me admittedly a little more than $30k, but not a fortune. Like yourself, I had refinanced several times during the time I had had this property.

By selling, what it allowed me to do was to go and buy another property, with better prospects for capital growth IMO, some value adding capabilities in the short and longer term. It also re-balanced my portfolio more towards houses, instead of apartment/flats.

It was my first sale, it was relatively painless and took just a fraction under 60 days to sell, with a 60 day settlement period. To give your portfolio a little extra umph to grow, targeted buying and selling works imo than does simply adhering blindly to buy & hold.

 

[Hooray]

The net profit after the sale will probably be $30,000-$40,000, as I have used the equity in the past to buy others so not sure if it is worth the effort.

Are you taking CG into account here? 150k CG (probably more, since you'll have to add back depreciation) will likely to be at least 25k?

 

[Jamie M]

I have used the equity in the past to buy others so not sure if it is worth the effort.

I'd keep it, sounds like it's doing its job.

Cheers,

Jamie

 

[tarah]

My plan was to sell and buy another in a better area, as you did Buzz but they are more costly than the one I am selling. Sounds like it worked out well for you Buzz.

I probably should talk to my broker (even though she's told me to have a rest from buying) and find out if I sell can I afford to purchase another more expensive IP. It would suck to sell and then realise I can't get another one anyway!!

Yes, I have thought of the CG and I should be able to claim the 6yr PPOR rule as per the ATO. Luckily during the boom I was living overseas and it was still officially my PPOR. I had forgotten about adding back the depreciation though. Thanks for reminding me!

Thanks!

 

[andrew_de_a]

If the property is not performing and you can purchase something that you think will perform then I would sell.

 

[Gools]

I think the rental yield should play some role in determining if it should be kept or not. If it's yielding 4% (on current value) then it would be tempting to look elsewhere. If it's yielding 6% then hang onto it. Also if it has future development potential it might be worth hanging onto as well.

It's a very complex decision with a bit of crystal ball viewing too.

Gools