Given the current market, anything to do with personal finances is bound to be a touchy subject for many and property is very much at the forefront of this list. The latest in a seemingly endless stream of interest rate hikes, coupled with an uncertain property market may be pushing many investment property owners to reconsider their portfolios.
On the other side of the argument, everywhere you look, the media is pushing the story that the rental market is red hot, which may also lead others to wonder if this isn’t the ideal time to hold, or even increase their stake in the property market.
It goes without saying that rental demand is exceptionally high, and rising, with Core Logic’s Quarter 1 report for 2023 reflecting vacancies rates significantly lower than this time last year, and rental prices skyrocketing.
Good statistics alone are most certainly not the only determining factor when it comes to making decisions surrounding buying or selling a property. And, as we’ve warned our clients many times before, there is a lot of bad advice floating around.
When it comes to making decisions around major investments, the wrong advice can lead to some very expensive mistakes.
Some of the myths we’ve debunked in the past which definitely weigh on rental purchase decision-making include the consideration of your own personal finances, and that buying in a capital city may not be the best or only choice for you. However, most pertinent to the current market is the notion of value increases, as in this volatile time the increases in property value are very far from assured.
So how do you know when is the right time to buy, keep or sell an investment property? Here are some points to consider.
Is inflation a reason to let go of your property?
Inflation is without a doubt pushing prices up across the board, and at this stage, it is defying the RBA’s attempts to curb increasing costs.
For some owners, the chance of selling their property at an inflated price may tempt them towards the market. For this line of thought, we would always caution against this if it is the only reason you’re thinking of selling. Just remember, if prices continue to increase, you’ll be trying to buy again on an inflated market.
For others, the desire to sell may stem from a fear of affordability due to increased mortgage repayments. If your property is renting well, and, let’s be fair, at this stage you’d be hard-pressed to find a property that isn’t, the increased interest rates should present a valid reason to retain your property, not sell.
According to a recent Forbes article, “Rising interest rates were the key factor underpinning the property market downturn last year.”
Meaning that if you sell now, depending on how the market trends, there’s also a possibility you may not get the price you could or should get for your investment property.
Whilst these two ideas may seem contradictory, this is the reality of the market we’re in at the moment and this instability is why inflation alone should not be a driving factor in deciding to sell.
3 signs you need to let go of your investment property
So now we’ve established that inflation shouldn’t be the only determining factor driving your property decision-making process. If this isn’t a good reason to sell what is?
Here are our top three signs that it’s time to let go.
- The property needs to be extensively repaired
Repairs to a rental property can be a far more complicated process than they would be to your principal place of residence.
Whilst a small fix here and there is certainly not a reason to sell your property, if your rental is coming up for more considerable and costly repairs, it’s worth sitting down and making sure that this is the most effective use of your capital.
There are pros and cons in trying DIY work on your investment property, and when it’s time to call in the professionals. If you’re not sure the numbers add up, the dedicated sales or property management team are always happy to sit down with you and help you weigh up your options.
- Maintenance and operation are more of a hassle now
Like all things worth having, rental properties can be hard work, especially if you’ve chosen to self-manage.
Being a property manager is far more complex than just collecting the rent each week.
Remember it also means that you’re in charge of property maintenance, marketing, finding and screening potential tenants and dealing with any legal issues if they arise.
We’ve had many conversations over the years with property owners who are just burned out from juggling the demands of their own lives, in conjunction with managing a rental property.
A first point of consideration is always to see if professional property management is a viable option for your property, but we’d be lying if we didn’t mention that this comes at a cost.
If you’re considering engaging a professional property management team, please give our team at Nicholas Scott a call. Our experienced team can discuss your options with you, to ensure that utilising a property management team doesn’t exceed your expectations on return for your property.
- You have substantial property equity
Suppose you’re one of the lucky, or very smart investors, that got into the investment property market at the “right” time. In that case, you’ve now likely reached significant equity in your property portfolio and you’re ready to cash out and realise that equity.
If you’re not quite sure how equity works in the field of property NAB provides an excellent article on this topic. To summarise briefly, however, “equity is the difference between the current value of your home and how much you owe on it…you can use equity as security with the banks.”
As banks tighten their lending, however, you may prefer to see this cash realised. If prices do continue to stay high then it might be time to consider selling. Our sales team at Nicholas Scott can give you a realistic and well-informed valuation of your property which can help guide you in your decision-making process.
In a perfect world, we’d all have crystal balls that would tell us exactly when the right time to sell is – unfortunately that’s not a reality just yet.
Before making any major decisions around your property portfolio you should always consult with your real estate agent. We have some of the best real estate salespeople and property managers available to help guide you in your choices.
Whether you’re upgrading your rental property, or looking to step away from the market altogether, you’re going to need a team on your side who can garner you the best return on the significant investment that you’ve made.
Contact the team at Nicholas Scott and we can find the solution for you.