It's OK to SELL

I like this article, makes sense to me
(Steve McKnight)

What Tom Hanks & The Terminator Can Teach Us About Property Investing - PropertyInvesting.com

Extract

It’s okay to sell.

One of the popular mantras in real estate investing is that ‘you should never ever sell’. That is certainly a proven way of deferring tax, but as you can see, both Hanks and Schwarzenegger are content to sell when the time is right. So, when exactly is that? When you can make more money, sooner, with less risk and/or lower aggravation.

Questions for further thought…

What assets do you own that could be sold to allow you to achieve better investing results? What will you do with the proceeds?

 

Thats a little misleading, since the US has CG deferral. As mentioned specifically in the article Arnie 'rolled' the proceeds into another property, deferring CGT. Selling can still make sense, but the calc is different.

 

Yes fair enough. I think CGT in US is less than Australia, think its a flat 15%

I think the point is if you can make money today, take the profits and pump it into another project/market to make more money it actually can make sense.

If you don't know what to do with the profits then perhaps a different story, I guess you could always reduce debt, not a bad thing.

 

I prefer to try to keep good assets, and use them to buy more...defer CG tax and increase the asset and cashflow base.

 

Different ways of looking at it. I think there is always a time to sell and it has to make sense, in other words you can make more money, better opportunities and I don't want to be holding too much stock at peak.

I sold my 3 villa development in Spearwood, Perth

Here are the numbers
Perth - 3 unit/villa development

If I held onto this property I would be lucky to achieve $420,000 per villa, that is a real loss of $90K+ per each villa around 180k. In effect I would be making a loss and rents have been also hammered by around 25%.
Perth market was starting to tank when I listed these on the market.

I then ploughed the money back into the Melbourne market and purchased 2 development sites, 4 townhouses and 3 townhouses and continued to make profits from this.

All to their own, but personally it makes sense for me to take money off the table if I see markets are close to peak, does not mean I sell everything, I still hold properties that are cash flow positive for income and development sites when the timing is right and the numbers stack up.


MTR

 

At what point do you give a market the all clear and head back in? Perth for example?

 

When the numbers stack up, supply is decreasing and I see there is an economic recovery

I don't see any of the above in the Perth market at the moment.

Lots of spruiking of a recovery and to be honest there has been some sort of levelling out, but its way too early for me to jump in. There is absolutely no rush, the yields have been hammered.

When I see the market starting to rise and volume tighten I think I have at least 12 months to jump in.

 

Not yet. Looking at the numbers, the market may have bottomed out. But what drivers are there for future growth?

 

I'm not convinced we've bottomed out. I hope we have, but part of me can't help but wonder if recent buying activity wasn't just some bargain-hunters bitten by the FOMO bug. I hope the inner suburbs hold up, but I think that the outer 'burbs still have more pain to come. There's still a lot on the market.

 

Just been selling in Sydney - partly locking in the profits, partly rebalancing portfolio and a lot of risk management.

If you think an asset has over shot its value - grab the money while it's there. Why stay over exposed ?

 

I agree. It's a definite "may have bottomed out".

 

... and if you can use profits to grow capital why not

 

"Buy and hold " is a lazy strategy!

"Buy, hold and reassess"!!

 

Only if I can sell at 20% return

 

I have always sold when the market peaks or when I hit a set goal

It's the same as candle sticking for stocks - agree to sell at a certain number rather than using emotion /gambling/speculation to see if it keeps going up

I only ever wanted to own in sydney - but 20yr ago bought houses in regional areas as it was all I could afford. Rockhampton I sold after they doubled in 3-4yr. 3 I sold when I realised they weren't going up fast.

Sydney I sell after they doubled in 4 years. I'm in the process now of consolidation, and being able to buy over 1 million where the entire experience is a dream

I always swap properties around

CGT is not painful as I'm not high income

I'm sticking with sydney as I feel it's a globalised sydney and will remain eternally warm. I also know it really well. I'm about to trade in my ppr and 2-4 IPs to buy a large

I still buy in Vic and Qld but their real estate sectors are undeveloped and charge a lot more than in sydney to both rent or sell.

 

Could the government possibly increase CGT ? That would shake things up a bit.

 

CGT is really just income that is added to your personal income tax...it's not a seperate tax!

 

Not while this set-up is in place. They want millenials to buy and highly geared investors to sell. Well, really we all do.
Once the millenials have their ppors, they'll want investment properties. I wonder how pollies will go about handing that to them on a silver platter.

 

I have never sold a house or commercial property. However I understand and appreciate the concept of picking the markets and so forth.

It makes sense when the time is right.

 

Great work