A common property investing rule-of-thumb is that you should “buy property and never sell”. That’s because prices always trend higher over time which means you benefit from
compounding capital growth.
Of course, the rule-of-thumb should be adjusted to include “buy
quality property and never sell” to ensure you maximise investment returns.
But the reality is, that sometimes the smartest thing to do, is to sell a property, even if it is a quality asset, if it helps you move forward towards achieving your goals.
I discuss four of the most common scenarios where I have recommended clients sell property.
Poor investment returns
Of course, the most obvious reason for selling a property is that its past performance has been poor i.e., a low capital growth rate. But most importantly, you must form a view about whether future returns are likely to be acceptable or not. If the assets fundamentals are sound, then it’s likely you should retain the asset. Sometimes investing requires patience and discipline, which I’ll write more about in a few weeks.
My previous analysis concluded that a property needs to underperform by at least 2% p.a. to warrant selling it. Therefore, if a property has only slightly underperformed (by say 1% p.a.), it may not be worth selling because doing so crystalises CGT liabilities and selling costs.
I believe that there’s almost never a bad time to buy a quality asset (property). By extension that means there’s never a bad time to sell a dud asset. Whilst that is true to a large extent, it is wise to be strategic about it. A du
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