Join Australia's most dynamic and respected property investment community

Deciding to sell & when?

Discussion in 'General Property Chat' started by skuzy, 20th Apr, 2016.

  1. skuzy

    skuzy Well-Known Member

    Joined:
    6th Aug, 2015
    Posts:
    71
    Location:
    Sydney
    Hi everyone
    Im interested to hear peoples thoughts on selling their IP's - in particular those who have actually sold not just hypothesize about it..
    what are top 2 or 3 factors which influenced you to sell?
    How much did the timing of the property market influence you ? For example did you wait and wait until the next boom (which happens every what? 7-10 years? generally speaking) until selling.
    On this iam reminded of a comment here or on SS once: you can never pick the top of the market and therefore will ultimately need to be happy with the selling price you end up with

    OR do we have people here who are in the forever hold period? What is the strategy here ? Holding forever would imply CG is not your top priority in the your investing plan right?

    Cheers
     
  2. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,225
    Location:
    NSW
    No, quite the opposite. Once you sell an asset like an IP, you lock yourself out of any further CG on that property forever.
     
    wylie and Cactus like this.
  3. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,578
    Location:
    Adelaide, SA
    I've sold one in the past (2008 Perth) and am about to sell another now (2016 Adelaide)

    Factors were very different each time:

    In 2008 post GFC I found myself in a position where I couldn't afford to put food on the table, thankfully Perth market was right at the peak but that didn't really enter into it. Needed to take that step back to continue moving forward.

    For the current one, don't really need to sell. It's cashflow positive just need more deposit for PPOR but could probably get the deal done regardless. Adelaide market whilst going up certainly not at the peak but again this isn't really entering into it.
     
    ellejay and skuzy like this.
  4. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,682
    Location:
    Perth
    I sold an IP in Melbourne in November. It was a negatively geared development site and I was sick of losing money on it. Top factors
    1) losing money every year - develop or sell
    2) sick of dealing with Melbourne tenants, agents and contractors

    We waited until the next boom and sold within a couple of weeks of the market peak in our area.

    We were very close to the top of the market. It seemed like some properties may have sold for a slightly higher price per sqm in the 2 weeks before we sold and it seemed like some of the heat had come out of the market on the weekend we sold. The market in our area seems not to have bounced back, so I would say we were very close to the top. I was happy with the price we got.

    In the end it came down to develop or sell. We were not in a position to develop at the time, so chose the sale option. It has worked out well. We bought at a good price and sold for a good price. I don't think I can ask more than that from an investment.
     
    Gockie and skuzy like this.
  5. chylld

    chylld Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    595
    Location:
    Sydney
    Just sold one of my IPs as I wanted to distribute my assets more evenly (between property/cash/shares/funds/etc) and I felt Sydney was at the top of the property clock. At 70% LVR it was about $500-600 positive cashflow per month, and net average ROI was 18% pa, so it wasn't doing too badly.
     
    skuzy and Perthguy like this.
  6. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,682
    Location:
    Perth
    Or free your capital from an asset with little CG potential. I sold my first IP in Feb 2013 for $257k and the new owners sold in Sep 2015 for $255k.

    I reinvested the funds from that sale into a property in Perth that experienced significant capital growth.

    @skuzy - reasons for selling that one:-
    1) lack of future CG potential and better opportunities elsewhere
    2) market peak in the area at the time
    3) strata manager was a PITA
     
    teg499, skuzy and chylld like this.
  7. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,225
    Location:
    NSW
    Yes, fair enough. I was assuming you had a well selected IP to start with, not a dog that needed shooting. :p
     
    skuzy likes this.
  8. Zeehan

    Zeehan Active Member

    Joined:
    22nd Aug, 2015
    Posts:
    41
    Location:
    Perth/Newcastle
    We held our investment property for 15 years, so of course the market went up and down plenty of times during that period. We were both working at that time so that was not a problem. A few years after we retired we decided to sell because (a) the complex was needing more maintenance; and (b) the market was in a good place at the time. We sold for a very good price (the agent got $90,000 more than we expected) so we were able to prop up our superannuation. We had a capital gains tax bill but did not begrudge it, we had done very well out of the property.

    So, if you can afford to hang on for a long time, it will probably be worth it.
     
    skuzy and Perthguy like this.
  9. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,682
    Location:
    Perth
    Hey! I made money on it ;)

    But that is a good point. We can't assume the IP that someone is selling is a good performer or has potential. It could be any of:
    1. a good performer with great CG potential
    2. an average performer with great CG potential
    3. strong growth in the past but not much potential for a while
    4. a complete dud, has never performed much and no CG potential

    or anything else. I have sold in scenario 3 and 4. I would not like to sell in scenario 1 or 2. That's why there is no blanket "hold" or "sell" rule.

    Back to your original post, you should consider if you are going to lose out big on future capital gains potential when you sell... or conversely if you are freeing your capital from a non-performing asset, and one that is unlikely to improve.
     
    skuzy likes this.
  10. JDP1

    JDP1 Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    2,839
    Location:
    Brisbane
    Most on this forum would seek to time the market;of course you would want to sell in a strong market near the top.
    I sold a previous one in melbourne in a declining market as there was a clear alternative (and better) use of funds, thus had to sell in order to do so.
    Combination of research and luck- worked out well.
     
    skuzy and Perthguy like this.
  11. skuzy

    skuzy Well-Known Member

    Joined:
    6th Aug, 2015
    Posts:
    71
    Location:
    Sydney
    thanks everyone for the valuable input !!
    been chasing a magic dragon for a while now (has been an interesting story)
    and now at a cross road with my ip on either selling or holding and this has helped me think about it a fair bit..
     
  12. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,370
    Location:
    Perth, Melbourne, USA
    Hi Skuzy


    Since 2011 I purchased and sold 12 properties in booming markets of Perth, Melbourne and Sydney.

    Goal - Maximise immediate profits and move onto either better markets and remain cashed up ready for other opportunities and to increase cash flow and create income streams from the holding stock.

    My strategy is to use any strategy that makes money and just keep monitoring property markets to find ongoing opportunities.

    CG is important however if property markets are changing and we are close to peak it makes sense to take some profits off the table, otherwise you will be holding for years for the next boom cycle. This does not mean I sell everything.

    When do you know you are close to peak? My guess is we all know but most choose to ignore the warning signs just my opinion
     
    Last edited: 26th Apr, 2016
    teg499, Whitecat, skuzy and 2 others like this.
  13. sash

    sash Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    3,214
    Location:
    Sydney
    Are you able to disclose the location?
     
  14. barnes

    barnes Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    674
    Location:
    Adelaide
    I have sold everything except 1 IP in the last 5 years, the last one I will sell ASAP. Timing of the market is everything. I believe there will be NO capital gains in property in the future.
     
  15. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,370
    Location:
    Perth, Melbourne, USA
    Why so?
     
  16. barnes

    barnes Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    674
    Location:
    Adelaide
    The economy. Rates are at historical low, next step is negative rates. :) Mortgages will NOT be cheaper than they are now. It means no more cheaper credit. Cheap credit is the ONLY thing that fuels property prices more than inflation. Plus economical downturn for many years to come - high unemployment. New restrictions for foreign buyers and lending. Downturn in China, where most foreign buyers come from. High Australian dollar (for now), this is the only thing that can change to positive. Immigration restrictions. Labor will win the next election.
    I hope I didn't forget anything. :)
     
    Special order and Whitecat like this.
  17. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,370
    Location:
    Perth, Melbourne, USA
    You left out markets are close to peak, have peaked or are falling....

    the buy and hold strategy for growth is a dead duck in this climate IMO
    however, there will be ways and opportunities to make money in the property game but investors will need to take a more active approach just my opinion.

    I just posted this on another thread by Steve McKnight... pretty much sums up my views.

    Capital Gains Tax Concessions Under Threat
    The other big property-targeted policy of the Labor Party is the reduction of the 50% Capital Gains Tax discount for investors to only 25% - effectively bumping up the capital gains tax payable on the sale of an investment property by half.

    So if you plan on buying one property, and realising the capital gain to turn one property into two, and two into four - or if you plan on retiring off your capital gains - then you’re in for a rude shock, and a great big tax bill in the future if Labor gets its way.

    The Myth of Doubling Property Value
    For years, property spruikers have peddled the line "Property doubles in value every 7-10 years."

    It only takes a quick look at actual property price statistics over the last 100 years to see that this is absolute garbage!

    Investors who stick their heads in the sand and continue to buy into this unsubstantiated myth risk finding themselves stuck with poorly performing assets that fail to deliver any substantial wealth for retirement.

    Flat Spots and Drops
    15 years ago, the other catch-cry of property spruikers was "Property always goes up in value."

    Today, we know this is not true.

    For example, just last week it was reported that Sydney median house prices fell in value by 1.5% in the last quarter.

    And although there are still periods of growth, the reality is they happen in short, sharp bursts – inconsistently between suburbs and with long periods of flat or declining prices in-between.

    If you’re an active investor you can monitor the market, buy in quickly, take advantage of growth where it occurs, and sell out to take advantage of growth in other areas.

    But passive investors will go through long periods of neutral or negative returns.

    Availability of Finance
    One factor that supported the property boom of the late 1990’s and early 2000’s was the deregulation of the banking sector - which led to easier finance for buying property.


    More people with access to finance means more potential demand for property, and more demand can lead to higher prices. But the opposite is also true…


    After the events of the GFC, banks have been much more hesitant to open the financing floodgates. And our regulators have introduced even tighter lending rules and tests over the past couple of years, meaning fewer people qualify for loans or can afford to borrow as much.


    In turn, this means fewer buyers in the market and less upward pressure on property prices.


    So - if you profited from the boom of the 90’s and 00’s and are hoping that cheap finance will deliver the same kind of returns from buy-and-hold investments over the coming years, don’t hold your breath.

    need to be an active investor not a passive investor, hold your breath and hope for the best..
     
    Perthguy and Whitecat like this.
  18. barnes

    barnes Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    674
    Location:
    Adelaide
     
  19. sash

    sash Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    3,214
    Location:
    Sydney
    Why so gloomy...money is made in times like this!

    All great news......it depends whether you are prepared or not.

    The uncertainty here will cause the inexperienced to dash....the silver lining is increase in rents particularly if labor gets in. If what I think is going to happen which involves labor getting in....Negative Gearing changes coming but morphing a bit ...and the severe impact on Sydney in particular it will be happy days.

    Most of the 20-30m investors I know made money in times like this...they are mostly buy to hold...they continue to buy in uncertainty and do not let their emotions/fear control them.

    I can see my self making a motza if the planets align.



     
  20. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,370
    Location:
    Perth, Melbourne, USA
    not at all gloomy just calling a spade a shovel.
    It certainly won't stop me investing