When should you sell your Investment Property?

Cara Brett 9 August 2022

“You are going to need to sell your investment property at some stage’’. This comment tends to be controversial and typically ends in a quizzical look from many.

One of the biggest goals many people have is to purchase an investment property (or 3), but that’s as far ahead as they’ve gone. The concept of buying an investment property is talked about far and wide, but the concept of selling an investment property doesn’t get as much air play.

When you bring it back to basics, you need to ask yourself the question: Why are you investing in the first place?

For most people it’s the concept of building wealth, or building something to create a better future for yourself. This means, you are probably going to want to spend the money one day and that’s ok. The whole point of investing is to be able to enjoy it and if that means spending it at some stage, then great. That does however mean that you will eventually need to sell your investment property because you can’t sell a bedroom when you need access to money, you need to sell the whole thing.

As with buying an investment property, you need a strategy around selling the property.

We always encourage people to buy their investment property with a loose idea as to when you may eventually sell it. That’s not to say that your plans can’t change, because they most certainly can, but having an idea about how long you intend to hold the property is very wise.

If you already have an investment property and no idea about your plan, that’s 100% ok, but it’s never too late to develop a strategy in line with your future plans.

So why do you need to think about this? Because it’s a little more complex then just selling it.

There are three main factors we take into account when considering the timing of selling your investment property:

1) How much tax will you have to pay? You may have Capital Gains tax to pay, meaning your investment has gone up in value (a good thing). It’s expected that some Capital Gains tax will be payable but aiming to minimise this as much as possible will be beneficial. That means the timing of your sale based on other aspects of your financial life may come into play.

For example, selling in certain financial years may be more beneficial than others depending on your levels of income and result in a completely different tax position.

2) What other goals or plans do you have? Your investment property may have a large amount of equity in it and selling it may enable you to pay out debt, invest in something else or retire earlier.

3) What other opportunities are out there? You may have other potential investment opportunities and selling a property could enable you to borrow and restructure your portfolio to acquire other investments.

As with all things in the investment space, this depends on your personal situation and ultimately what you are trying to achieve.

I challenge you to consider the concept of when to sell your investment and what you might like to spend the money on.

About the author: Cara Brett

Cara Brett proudly heads up Bounce Financial - founded in 2014 after a successful, decade-long career in the financial services industry. Cara’s experience encompasses both the financial product and financial advice sides. This gives her a comprehensive and holistic knowledge of all facets of financial planning.