When to sell?

Like most investors with property in another state, I constantly get barraged with sincere and imploring letters from Real estate agents who have got my name and address from the Title register and have "genuine buyers for a property like mine at XYZ street and am I interested in selling or getting a free market appraisal..."

Occasionally these letters are handy in that they'll list nearby properties which the agent has sold and what they got for them but I usually just file them away for future reference.

However, one letter caught my eye the other day as it was from the husband of an old friend of mine. The particular property in question is one that I've contemplated selling because it is a fairly average one bedder with not a lot to recommend it (apart from being in a good suburb and the fact the bank now thinks it is worth 20K more than I spent on it and its returning 10%).

All of which led me to start thinking "when is the right time to sell?"

I'd be interested in people's views.

This property is tenanted with every likelihood of the tenant renewing (altho the tenant might even buy it himself if I put the offer to him - his father's in real estate in a country town).

I don't need the money I'd clear from the sale and to be honest I haven't found another property which is a good enough deal to put the $ into. I suppose I could wrap it - but I have to admit my personal view is that wrapping is a lot of effort for not much return on a one-off basis.

My concern with this unit is that in the long term it will need a makeover but will probably not realise too much more rent because of its size and layout. I don't like to spend money on a refurb unless I get a total return on the cost of 3 times what I spend.

On the other hand, I wonder whether people with 1 bedders in Sydney 10 years ago thought they'd ever be worth what they are now?

I look forward to some general comments on when and why others have done some "portfolio readjustment" :)

Cheers
N
 
Originally posted by NigelW
not a lot to recommend it (apart from being in a good suburb and the fact the bank now thinks it is worth 20K more than I spent on it and its returning 10%).

N

Certainly seems to be a little bit more than not a lot. I guess it depends how bad the unit is as to whether you HAVE to get rid of it or not. Another thing to consider is the costs involved in firstly selling this property and then acquiring another (Agents fees, stamp duty etc). When these are factored in the cost of keeping the prop and doing a small reno when needed may be a better prospect.

Cheers
Chris
 
Hi NigelW,

If the property is easy to maintain and rent is covering all expenses, why sell? All you do is make other people rich in the process...r/e agents, government, settlement agents, water authority ect.

Why not be one of those people that in 20 years time that can tell stories about how they bought their property for an amount that is covered by 1 years rent.

As an aside, it might be worthwhile updating your profile to show your location. Any answers to your question may be different based on your location...

Glenn
 
Hey Nigel,

1) Draw down on the extra equity and employ these dollars elsewhere. (Shares!!) At an 80% draw down, it is highly likely that the net amount would exceed the net profit after cost of the sale.

2) However; if the property does not conform to the required standards / fundamentals necessary for capital growth and cash flow, then you might consider replacing it with another more favourable project.


Regards,

Steve
 
Hi Nigel

unless its a dog why would contemplate selling it. Seems you are getting a good rental rtn, and by good burb I suspect you mean one that will grow well. Indeed what would replace it with ?

What more could you want ?:confused:
 
Here is the one reason I would sell. Actually one of two but I doubt anyone quite has the credit card debt I do!

I sold a property for a $300,000 profit a few years ago. I wouldnt normally sell, but I was forced into it. Now that property was probably sold within 40k (at best) of its absolute current maximum price.

With that $300k I paid off all my cc debt and put the rest into a bunch of little properties.

The best performing of those properties I bought for 64k and have just exchanged contracts with a price of $142k. I have 6 more similar ones.

There is NO WAY that one original hovel would be worth $500k more now, so I have outperformed the single property growth by $460k. In 1 year.

One of our BRW200 property developers (B.E are the initials) said to a friend of mine "your worst property is ALWAYS for sale" A very clever solicitor friend of mine said to me 'No, Jeremy EVERY property is for sale FOR THE RIGHT PRICE.'

In the current market I would, depending on tax issues _seriously_ consider selling, and increasing your gearing using profit as deposits in the next few years.

It's also nice when you have done quite well to buy yourself a present, maybe a holiday or that plasma TV that your tenants have.........


Good question, and you won't ever get the 'right' answer!
 
Hi JL

I can see your point.

But you dont need to flog a place to get at the asset growth to stick into the next deal, thats the whole point.

Depending on your circumstances you can get up to 95 % refinance, the proceeds of which you can use to further gear - vroooooom.

Ta

Rolf
 
Problem is cross collatralising! LMI's don't like big loans, and when you gear at 95% you will get big loan sizes very quickly. In my example I could only get 1-2 more properties without the sale. I didn't fight hard for the refi, but I am constantly fighting MI's so decided to give up and do what they wanted. Also as I paid no tax it was an easy way to increase ffffaaaassssstttt!!

I hope you didnt disagree with me then Rolf!!!! Simply saying I can see your point sounds a lot like something you would hear Simon Crean saying to Peter Costello............
 
Hi JL

No I would not disagree with you, especially about LMI. But why xcoll, what you been up to ?

Im just saying there is more than one way to achieve the same thing.

Hw did you get away without CGT ? PPOR exemption ?

Ta

Rolf
 
Thanks everyone for your insightful comments. Sometimes the hardest thing to do is to do nothing.

hmmm...I must get one of those house buying credit cards... :p
 
Asy,
Very bloody funny I don't think:)

Nigel,
Not something I would recommend, but it does put hairs on your chest! Handing over piles of cash (saves the bank cheque fees!) at an auction is unusual and it is NOT a long term strategy;)
 
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