Owners Consider This Before Selling Your Property
Usually, one of the major characteristics of a booming real estate market is a shortage of property listings to meet a swelling of demand. The fewer listings out there, the more fiercely the waiting market of hungry buyers compete over the properties that do make it to market. This pushes property prices up and, with them, the commissions earned by real estate agents. The flipside of course, is that a shortage of listings means a shortage of business for a lot of those agents, so while they may do well from properties they sell, they have to prospect harder to convince people to list their properties and give them some business.
So, as a property investor, when the market begins to grow, you can expect to be contacted left, right and centre by agents promising you motivated buyers and big gains if you sell your investment property.
Hey, everyone’s got to make a living, so you can’t blame them. But before you let them convince you to sell, think long and hard about what it would mean for your goals.
A gain in the hand means not much later
Property prices have risen significantly across a lot of markets over the past 18 months in Australia and are likely to keep rising until the end of this year and even beyond. The value increase means an agent can come to you offering to get you a great price on one or more of your properties and actually be telling the truth. Double digit growth in multiple markets this year can translate into impressive equity gains. An agent might say they can get you $250,000 or more on a property you bought last year for less than $200,000. That’s a big gain at the affordable end of the market. But don’t forget you also paid stamp duty on the property, legal and accounting fees, inspection report fees, maybe a buyer’s agent who helped you find it and, once it’s sold, you will pay tax on that. So there may be just a few thousand left of profit after all that is taken into account. That’s less than the equity you would be able to pull out and use by getting it revalued. That option would also protect you from paying capital gains tax.
Where else could you make up the difference?
You have to keep your eyes on your strategy, even as markets rise and fall and you are tempted by opportunistic agents along the way. Ask yourself what you’re trying to achieve and what you want your property to do for you. You might get a short term boost by selling in this market, but how does that really help you get to your goal? The day you sell an investment property is the last day that it makes you any money. Instead, in this market you might be able to bump up your rent by $50 to $100 a week, depending on where you are. That’s a few thousand a year. Got a few properties in your portfolio? Multiply that amount of extra money. You can increase your cash flow and have more money each year coming in on your properties. As prices keep rising and everything is getting inflated, the greatest thing in an investor’s life to get inflated is rent. The increase in the cashflow that comes through can make all the difference to your portfolio.
Timing the market and time in the market
Imagine if you sold your property at the start of a boom. If the market doubles in the next 12, 24, 36 months or 5 years, you’ve had minimal risk for maximum return on a property that you bought for below market value last year. The biggest risk you will face is losing what you might have earned in the future by holding your investment properties long term. Imagine selling your property now and then finding out five years later someone sold it for two or three times as much.
Reach out to getthemax.com.au
If agents are harassing you to sell, look for a second opinion. b Invested founder Nathan Birch has launched a web service known as Get The Max, where he will run the rule over your portfolio or individual property and tell you what it’s really worth when it comes to rental return and also resale value. If you really want to sell, he can put you in touch with the best agents in your area that will make sure you get the maximum result for your asset. Head to getthemax.com.au and fill in your details.