Found myself cash poor - Should I sell an IP?

Hello, I was hoping for some guidance.

I have 4 investment properties. The total value from 2/22 was around $1.75m with $1.3m mortgage. I rent myself.

I've now found myself in a position where I am now cash poor. A number of things have happened the past few months which has really dwindled my available funds. Because of this I am looking at selling 1 of the properties to keep some extra cash on the side. There are 2 in SA but they are on decent size blocks of land and I want to hold onto those as I do have future plans for them. The other 2 are in Calamvale and Pimpama QLD and both just 3br townhouses in newish development areas.

I don't really have anyone I can talk to about this. If in a cash poor position, am I doing the right thing by selling an IP? I'm not diversified and all my money is basically in these properties. If selling one, how do I decide between selling Pimpama or Calamvale?

Pimpama
Estimate sale price - $495,000
Purchase Price - $397,900
Current mortgage - $307,800
Current rent - $410 week

Calamvale
Estimate sale price - $470,000
Purchase Price - $421,900
Current mortgage - $368,000
Current rent - $400 week (increasing to $450 in June)

 

Before deciding whether to sell or not, you need to go over your day to day budget with a fine tooth comb and see where the cashflow problem actually is, and if there is anything you can do to improve the situation. You also need to figure out if it is a short term, medium term or long term issue. Is there any chance of things improving given time and a strict budget? Do you have to ability to ride out that time? Do you have an emergency fund? Do you have any consumer debt (credit cards, car loans, etc) that are holding you back? Do you have any smaller assets that you could sell? Is there any chance for you to produce further income (second job / side gig / extra hours / etc)?

If selling an IP is still looking like a good option to you after looking at all these things, then you need to do the maths on which IP is going to actually free up the cashflow you need, and which IP is likely to perform the worst in the future?

On a side note, my own family is in a pretty asset rich, cash poor position. We could sell an asset or two and have much more free cash to play with, but in the longer run we would lose out on significantly more. But the important thing for us is the 'reason' we are cash poor, is due to some very specific lifestyle decisions we have made. (Primarily putting 6 kids into private schooling. Lol). So we have a monthly income of $x and are currently spending pretty much all of it to cover everything.
But we are not tipping over and going into debt. And we have our emergency fund. And our bills, insurances, and other expenses are all paid. And our lifestyle is comfortable.
So we decide that it is ok to live this way for a few years whilst the kids are all school aged, and we keep our assets and our net worth keeps growing. We are just not doing any additional saving / investing at the moment. Worst case scenario, we can always sell an asset later if we ever find we really do need to.

But that's our situation. And when you say you are cash poor, you didn't give any real indication of just how tight / bad things are for you. Your situation could be a lot worse then ours, and selling might be more of a need.
But that's what you have to figure out. Is selling actually nessecary? If it's not, then you have to question yourself about what selling actually acheives for you, and if that outcome is worth it. There is no right or wrong answer here, because it depends on your individual goals and values.

 

Agree as above - I'd start with a focus on understanding why cashflow is an issue.

Selling an asset will solve the short term cashflow bind (potentially with some added complexity and tax issues) - but if you've not solved the key issue then those funds might quickly find their way into the same abyss and you'll end up in a worse position having foregone the strategic reason for buying the property in the first place.

 

I’d be reluctant to sell any property at this point. They’re like golden eggs that will one day hatch.

I’d try and earn money some other way eg a second job.

What happens if you sell and then in a few years time the property price rises 50%? You’d be giving yourself uppercuts.

 

It’s obvious you’ll have more money in your hand if you sell Pimpana. But if the loans are crossed that may be an issue.

As I previously mentioned I’d be reluctant to sell and would prefer to increase income other ways. Or reduce expenditure.

 

Investment properties to me are are a form of “forced savings” so as @datto has mentioned I would sell as a last resort..

‎Investopoly: Should you ever sell property? on Apple Podcasts

 

Calamvale and Pimpama are units or townhouses? might need some more information before figuring out which to hold/sell