Interest rate hikes, tenancy reforms and government proposals to hike taxes have finally begun to take their toll on the nation’s property investors, with a recent survey by the Property Investment Professionals of Australia (PIPA) showing a rise in the number of investors who had sold at least one property in the past 12 months.

One of the key sentiments of the survey was that many of these investors felt they were no longer able to hang onto their properties.

But it’s important to remember that markets will fluctuate and conditions will change.

If you can hold onto your asset through times of uncertainty, it may pay off when you come out on the other side.

Here are some reasons not to sell your investment property.

Swapping value growth for decline

History tells us that property is an appreciating asset, while cash depreciates in value every day thanks to inflation. In fact, cash is only worth something because the government says so, there is no inherent value.

The day you sell your property, you begin to lose money. While if you hold it, you are accessing future money far greater than the debt you owe on the asset.

Even when selling conditions are good, you will earn less by selling now than if you held for another price cycle or two.

Once you sell, that’s the end of the money you will make from that asset.

Inflated returns

Not only does your value increase over time against a debt that reduces or at least remains static, but your rental returns increase over time with inflation.

PropTrack data shows rents have risen 14.6% nationally over the past year and 18% across Sydney. Perth rose 15%, Melbourne 14%, Brisbane 12% and Adelaide 11%.

That’s a healthy year of growth at any time, but the most recent year comes on the back of more than double digit growth for the previous 2 years too.

Vacancy rates remain at historic lows and migrants are now flooding into the country at a record level over the next 5 years.

The rental income your assets can earn will certainly increase over the coming years. That alone may prove the difference for some people battling to hold properties. If you sell now, that is even more future money you are giving up.

Times will change

Remember, it’s not just property that operates in cycles, but also interest rates.

The majority of economists currently believe that interest rates have either peaked or may be subject to one more RBA hike. Either way, the cycle of increases is very near to the end. So, if you are able to get by now, things may not get much worse.

And potentially, rates may begin to come down as early as next year. That would provide some relief, along with any growth in value and rental income you experience.

Reasons to sell

Sometimes, it makes sense to sell your investment property, you just need to make sure you’re doing it for the right reasons.

Say you bought a property at the bottom and it has experienced a great growth cycle, selling it could allow you to buy 2 other properties at the bottom of their markets with greater upside for value growth and potentially a much higher rental return. You might have a place worth $400k and are getting $500 a week rent on it, but you can leverage into 2 properties, each renting for $400 a week, then you’ve boosted your return by $300 a week and accessed a double chance for further growth.

Another good example is often mentioned by B Invested founder Nathan Birch, where the investor accumulates 10 properties over time and then after a period of growth sells 5 of them to pay off the debt of the remaining 5. Then you are left with 5 unencumbered properties in a portfolio, returning a passive income and accumulating further value.

You want to hold but can’t

Ask yourself if you have explored all your options.
First, review your rents and make sure your income is in line with the market. If you can increase even by a small amount, it can add up to a lot over a year.

Then, speak to a mortgage broker about refinancing. Some lenders have cut their buffer rates recently and you may find you can jump ship to a better deal with repayments you can service.
Or, you may benefit from a complete restructuring of your portfolio’s finance strategy. Zinger Finance has a team of experts that can discuss options that you may not have known you had.