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6 questions to ask before selling your investment property

18 April 2017

At one time or another selling an investment property will be a serious consideration, whether it’s an underperforming asset or as part of a structured sell-down. However, before engaging a sales agent, here are 6 questions to ask to ensure you’re making the right decision.

While the emphasis for property investors is often placed on buying property rather than selling, it’s still important to have a firm understanding of the latter.

Indeed, most investors will consider selling one property or a portion of their portfolio at some point in their life.

Here are 6 questions to ask yourself to help ensure selling is the right option

1. Does the asset meet long-term investment criteria?

While taking a long-term view with property investment is a proven strategy for creating wealth, it’s easy to become impatient if the asset isn’t performing as expected. This can lead investors to doubt the quality of the asset and perhaps consider selling it. Therefore, investors need to keep the long-term view in mind and objectively assess the asset’s growth drivers to determine if the property is likely to continue to underperform, or if they’re simply being impatient.

2. Is the decision to sell being driven by short-term financial pressures?

Unforeseen short-term financial obstacles can influence investors’ decisions, such as cash-flow restrictions, changes in life circumstances or unplanned costs. Before selling it’s important to understand whether these pressures can be alleviated, as working around these immediate hurdles may allow you to keep the property and take advantage of ongoing capital growth.

3. Is the market right to sell?

What are the current conditions in the broader property market as well as the sub-market where your property is located? It’s important to understand the underlying demand and supply fundamentals that exist and whether it’s a buyer’s market or a seller’s market. If it’s the former, it could be better to hold onto the property until conditions are stronger.

4. Are there loan/debt structure issues that could impact the sale?

If your loans are cross collateralised, issues could arise because the co-secured properties will typically be revalued by the lender. If one property has dropped in value or your borrowing capacity has changed, this can impact the amount of money received from the sale transaction. In some cases, lenders may force investors to sell a second property to maintain a specific loan-to-value ratio.

5. Are there potential changes to the property’s zoning?

If the property is subject to a proposed rezoning in which the development density is increased, it may be better to delay the sale. If a property’s zoning changes, for example from being allowed to build four dwellings instead of one, the higher density zoning is likely to attract a higher price.

 6. Are there any add-value opportunities before selling? 

If the property is aging or dilapidated, are there any cosmetic upgrades that can be completed to demand a higher asking price? This might be a fresh coat of paint, laying new carpet or installing more modern blinds.

There are many considerations that need to be assessed to determine if selling an investment property is the right decision. Therefore, it’s important to refrain from rushing any decision before all the options are explored.

Damian Collins is the founder and managing director of property investment consultancy Momentum Wealth. Offering market leading research and advice on the Australian property market, the company helps clients accelerate their wealth through property investment by assisting them in the strategic planning, financing, acquisition, management and development of their commercial and residential investment properties. Damian has completed a Bachelor of Business at RMIT University and a Graduate Diploma in Property at Curtin University. Damian is a board member of the Property Investment Professionals of Australia (PIPA) and is the Deputy President of the Real Estate Institute of Western Australia (REIWA).

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Momentum Wealth Property Investment Consultants offer market leading research and advice on the Australian property market, assisting clients in the strategic planning, financing, acquisition, management and development of commercial and residential investment property.

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