When to sell?



From: Tony Donnell

Hi All,I'm new here.
I've been reading the forum for awhile.
Wonderful information!
Any suggestions on my situation?

I'm 43 with a small business providing good cash flow.
I have three investment properties and one other with a partner.
One of these I own,that is no mortgage or loan.
My place of residence that I built last year
has a mortgage of $225,000.Property recently valued at $580,000.

Due to the current boom,I'm tempted to sell
my unit I own outright to pay down or out
the $225,000 mortgage.

I don't have an exact retirement time but it
will be between 4yrs to 7yrs depending on
when I'm completely fed up with staff
problems.Lately it's seeming like it will be sooner than later.

Thanks in advance,
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Reply: 1
From: John P

Surely Tony a lot would depend on whether the IP's you are left owning outright present a sufficient cashflow with which to retire on? I think that the answer to your question lies with you. If it were me and the net rent was over $3000 per week......

Thankyou linesmen, Thankyou Ball boys!!!!

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Reply: 2
From: Glenn Mott

Hi Tony,

Selling your PPOR would be a useful move from a tax point of view but then you have the issue...where can I live on the proceeds after debt relief and be as happy as I was?

Seeing that you already have a few props, you know what is and is not good value. Maybe you could watch the market a bit over the next 2-4 years, pick up a few of these properties that have been built and sold to the "true believers", rent them for a small rental gain per year, get a big depreciation allowance, retire and get a health care card and maybe a small pension....one for the financial planners me thinks

Good luck

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Reply: 3
From: Paul Zagoridis

Hi Tony,

welcome to the forum.

I am not a fan of selling IP's to pay down PPOR mortgages.

You incur Capital Gains Tax liabilities and kill a golden goose in order to remove a small monthly payment on your home.

In your situation I'd favour never selling. Actually I'd only sell if I had a better investment opportunity.

If your PPOR mortgage rate is around 7%pa, can the unit you are thinking of selling do better? Firstly you can borrow against it and secondly it offers rent and capital gains.

Do not fear debt in retirement. At 50 you can expect at least 20 more years of life. That means retiree's should still aim for growth investments.

Your portfolio can provide an income as well as a growth vehicle in years to come.

Paul Zag
The Oz Film Biz site is archived at...
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Reply: 3.1
From: Dale Gatherum-Goss


I've said so many times before, the wealthy people of the world often say: "never, ever sell"

As has been mentioned, you give away too much of your wealth to everyone else

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Reply: 3.2
From: Tony Donnell

Thanks guys,
Paul,due to the fact that I started investing in property only a short while ago,
all but one of my properties will not be providing any cash flow when I'm ready to retire.
They will be at best neutrally geared or still negatively geared.I will have rather
good equity as I've purchased for capital growth other than cash flow.
I don't know but it's been said that you can't eat equity.
What is the best strategy for people in my position.
I understand that with a Jan Somers
type of plan you could perhaps negative gear seven to ten or more properties over many years.Sell off half or more at retirement time. Pay out existing loans left on the properties you keep and collect rent for your income.
Does the it work the same when you only own
a few properties?
It's unlikely that I will be purchasing other
properties due to cash flow,its getting tight.
I know there is no correct answer but it sure helps broaden the options with others
valuable in put.
Cheers Tony
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Reply: 3.2.1
From: Paul Zagoridis

Over 4-7 years if you have good capital growth you should also see reasonable rent growth, otherwise you must question your assumptions on the capital gains available.

So some of your neutral properties should go positive.

Interestingly once you have a lot of equity you can turn it into income streams. Either via whatever system Steve Navra has discovered by then, or some less esoteric system. I'm tempted to say... nah!... Oh what-the-heck, it's late... "Don't you worry about that!"

Selling x% of the portfolio to pay down debt and improve your cashflow? Only where holding the property will return less than your average interest rate. I.e. you have a ripper IP that went up x,000% and is now stagnant. Sure sell it.

Once you do the retirement planning it is strictly business analysis.

Oh and never assume you have hit the serviceability wall. Meet other investors and see what their doing. You'd be surprised how many have been told to they are maxed out only to meet the right broker.

As for cashflow getting tight. Once you have fat equity could you imagine buying a few properties for yield?

Paul Zag
The Oz Film Biz site is archived at...
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