When would you sell?

Discussion in 'Investment Strategy' started by David Chin, 16th Apr, 2017.

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  1. David Chin

    David Chin Member

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    How much would your IP or IPs need to drop in estimated value, or your LVR to increase, for you to put your IP or IPs on the market?
     
  2. neK

    neK Well-Known Member

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    The question for me is what will I do with the money
     
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  3. Gockie

    Gockie Life is good ☺️ Premium Member

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    They wouldn't be the reasons for selling for me.
    1. Troubles. Floodings, large building issues.
    2. Do I think the market in the area has peaked? Do I think the capital gain going forward is minimal?
    3. Can I do something better with my money? Can I reinvest it elsewhere for a better return?
     
    Last edited: 16th Apr, 2017
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  4. Ace in the Hole

    Ace in the Hole Well-Known Member

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    Selling is not part of my strategy.
     
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  5. highlighter

    highlighter Well-Known Member

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    I don't think that's the right question to ask. I think you need to look at a whole suite of factors, especially the direction market fundamentals like supply, incomes, rates, lending and population growth rates are taking. You need to look at your asset and its competition i.e. what other assets like yours are on the market, because this is what will attract buyers down the track. You also need to look at who those buyers will be. Are you in a portion of the market dominated by stable owner-occupiers, or by recent investors and developers?

    Never look at past performance, always look at where fundamentals-based momentum is going to come from. An asset that drops in value could still have excellent long term potential or rental income. Sometimes in a correction people make silly sales decisions, just as people make silly buying decisions in a boom - just as stock markets overcorrect, so can housing markets, so often selling during that lull is a bad decision. Still, some assets that have dropped could certainly still be worth selling - it all comes down to asking where your growth is going to realistically come from. Supply is a big factor here. If you have seen a drop and there are thousands of identical assets listed, a pick up in growth may be unlikely.

    On the other hand, an asset that has recently seen very strong growth might easily and quickly become a dud if it's in an oversupplied sector of the market, or is in an area where there's little industry. Look at your competition and the stability of that competition e.g. if you own an apartment in Melbourne's CBD you might have seen a big gain, but is that likely to be sustained? Could that rapid growth turn to a decline? Conversely if you own say a quality house in a good, popular suburb of Adelaide, and have had disappointing growth, but are earning good rent - especially if the suburb is tightly held, you aren't likely to lose buyers - people will always want to buy houses in good suburbs, owners will hold on through a correction, and there may be little sense in selling.

    It's always a good idea to "know when to hold em and when to fold em" so to speak. Markets go through phases of rapid growth followed (usually) by phases of decline, and these periods need different strategies. Investment can be like managing a plant. Sometimes, it grows better if you prune the dead branches. Working out which branches to prune should be a close examination of that branch - not of arbitrary measures like "this branch is only so many centimetres, or it isn't as long as this other branch, so it has to go"
     
  6. HUGH72

    HUGH72 Well-Known Member

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    A drop in value or rise in LVR wouldn't and hasn't caused me to consider selling.
    Continual tenant problems or on going vacancies would be a reason to sell though.
     
  7. ellejay

    ellejay Well-Known Member

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    Agree with most of the reasons above. Not necessarily because of a dip in value. I'd also sell to release a chunk of cash to go on an amazing holiday or fund my lifestyle. That's part of my strategy going forward.
     
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  8. Scott No Mates

    Scott No Mates Well-Known Member

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    Decreasing net yield accompanied with increasing holding cost without commensurate increase in gross returns. I was discussing this very matter last night.
     
  9. Perthguy

    Perthguy Well-Known Member

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    I have lost big chunks of paper equity but I would not consider selling those properties because they are part of a larger long term strategy. I would sell to pay down debt if I reached max borrowing capacity and I had somewhere to invest.
     
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  10. David Chin

    David Chin Member

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    Great answers. Thank you.
     
  11. Otie

    Otie Well-Known Member

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    My plan is to accumulate over the next 10 years, hold as long as I can, and then sell off what is needed to pay out mortgages. I'd like to hold through a downtown because I'd regret it ten years later if I didn't.
     
  12. cloudproof

    cloudproof Member

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    Capital gains tax.
    Selling costs.
    What was your narrative with those?
     
  13. 6000

    6000 Active Member

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    I believe the question for me would be "what (better) assets could I hold with the servicing capacity?"
     
  14. Gockie

    Gockie Life is good ☺️ Premium Member

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    I think this sentence needs more qualifying info. Eg. Assuming there's also a boom?
     
  15. Gonx

    Gonx Well-Known Member

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    I sell when I have studied all options comparing both holding and selling outcomes. Before I do that though I would need a good reason to sell like to free up cash for another investment that I can see is going to make me more money in the short term at least.
     
  16. Otie

    Otie Well-Known Member

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    Well historically I couldn't buy a house today at prices 20 years ago so I would expect it to be worth more than I paid initially.
     
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  17. Beano

    Beano Well-Known Member

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    Why not just hold all your downtown properties and pay them off over 12 to 15 years with the surplus profit?
    Selling incurs a lot of costs that can be avoided by holding
    I would say the number one regret of investors is selling.
     
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  18. Perthguy

    Perthguy Well-Known Member

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    With all the changes to borrowing capacity, don't assume that selling and paying down a loan will improve your servicing capacity. In my case I neglected to check with a broker what my borrowing capacity would be if I paid down a Pre APRA loan. The loan I paid down was $440k (from memory). Borrowing capacity after was $280k :(
     
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  19. Perthguy

    Perthguy Well-Known Member

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    I have done it. The CGT and selling costs were less than I thought.

    I sold an IP in Melbourne. I don't regret it. I think it was a good move.
     
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  20. Beano

    Beano Well-Known Member

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    I have sold 5 places regretted selling 4. (The one i do not regret selling was a company share ownership . Unable to lease out and unable to borrow against !)