SHOULD YOU SELL AN INVESTMENT PROPERTY SO YOU CAN BUY MORE?

Depending on your strategy as an investor, you may feel tempted to sell an investment property which has gone up in value in order to buy new ones at the start of a new growth cycle – but is this really the best move? Nathan answers the following question from a recent Binvested webinar:

“If you have properties in Western Sydney, bought 4 to 5 years ago, that have gone up significantly, would you sell to purchase more in other states, ie. Queensland?”

NATHAN TAKES A “BUY AND HOLD” APPROACH

In it for the long term, Nathan likes to hold onto his properties. He claims to have retained about 98% of his purchases since starting his investment journey in 2003. This is a buy and hold approach. It is this approach that has seen him prioritise strong growth potential above all else.

UNLOCKING EQUITY

By purchasing properties that have made strong capital gains, Nathan has made it possible to build his portfolio, in large part, on the growing equity he has created. Buying below market value creates equity from day one, and consistent growth keeps this equity rising. He likens his approach to owning a cow. If you owned a cow and milked it every day, you could have milk, make yoghurt and cheese, and live a happy life. If you decided to slaughter this cow, you would have an abundance of meat for a year or so – but then what? You would have no further means to build your prospects at making dairy. So it is with property.

KEEP YOUR ASSETS GROWING

Think long and hard before selling investment properties that have performed well in order to buy others in markets where growth has yet to boom. In Nathan’s case, most of the properties he purchased in Western Sydney – the foundations for building his 200 plus property portfolio – are still there, playing an important role in his financial life. In fact, the equity he has earned from these investments has helped him make the larger purchases that only a successful investor has access to, such as those of shopping centres and apartment blocks. By holding onto his properties, Nathan has increased his asset base and his net worth, while also unlocking equity in order to purchase in markets where growth is set to boom.

Do you use a buy and hold strategy like Nathan Birch? How has this helped to build your success as an investor? Please share your experiences in the comments section below.