Is It Time to Sell Your Investment Property?

With the current landscape of rising interest rates and property taxes (in some states), many property investors are considering the option of selling their investment properties. While selling might appear as a viable solution to evade the mounting expenses of owning rental properties, it’s crucial to factor in the associated costs of selling. Moreover, if you opt to sell now and plan to re-enter the market later, there’s a possibility that you might not be able to acquire a property of the same standard as the one you currently own. Below, we delineate some key selling costs and how they can potentially impact your financial situation.

Don’t Get Blinded by Profit

If you’ve held your investment property for several years, chances are its value has increased. While it may be tempting to focus solely on the potential profit from the difference between your purchase price and the sale price, you also need to consider other selling costs.

First, agency commissions can range from two to six per cent of the property’s sale price. On top of this commission, you’ll need to pay for marketing your property. A high-quality marketing campaign typically costs 0.5 to one per cent of your property’s price. A $600,000 home means about $6,000 in marketing fees.

What about Capital Gains Tax (CGT)

You must pay capital gains tax (CGT) when you sell your investment property. If you have owned the property for over 12 months, you’re entitled to a 50% CGT discount. Remember, the capital gain occurs on the sale contract date, not a settlement. If you’re considering selling around the end of the financial year, remember this for reporting purposes.

Consider Your Long-Term Goals

Both holding and selling an investment property entail their own set of costs. The right decision for you will hinge on your long-term goals and what you aspire to accomplish through property investment. By retaining a valuable asset, you have something to leverage for further growth, a steady income, or tax deductions. This strategic approach can provide you with a sense of direction and reassurance in your investment journey.

Deciding whether to hold or sell your investment property is a personal decision that should be based on your unique situation. It’s imperative to consider the costs associated with selling and how they align with your long-term goals. Always remember to seek tailored advice from your accountant, financial advisor, and other professionals. This will ensure that you are well-supported and informed in making your decision.

If you have any questions or would like to have a chat about how Your Property Team can help you with your investment property, click here to get in touch, we’re ready to help!

Remember, this article is general in nature and is not financial or legal advice. Please consult your professional financial and legal advisors before making any decisions.