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When it comes to a successful property investment, we all have a way in which we believe is best suited. There are various factors involved when buying property, especially when it’s for investment purposes. But do you know the ins and outs when it comes time to sell?
We have broken down the three golden rules for any property owner to factor in when it’s time to sell their property.
It’s important before you make any decision that will affect your future finances. That you understand and have researched all aspects of what outcome you require if you were to sell. And what better way to gain all this knowledge than seeking out advice from a qualified experienced professional at Melbourne Property Valuers Metro
It’s important to know when to sell an investment property, or even if selling is the best idea for you, why not start with following these rules and read more about property valuations, an essential tool to have as a homeowner.
Rules are an important part of living, giving us a clear framework to navigate the important aspects of our life and the decisions we make.
Firstly, What is an investment property?
A property in real estate that a single person or a group of investors have purchased to generate an income. Whether it’s through rental income, appreciation, or resale potential. An investment property varies either short or long term, it depends on the purpose in which you have purchased the property for.
Let your property do the work
There are different reasons to buy or sell property for wealth intentions, when it comes to property investment this differs from buying, fixing up or flipping properties. You need to have a clear understanding of what a property investor is and the outcomes you are expecting from the investment if they will benefit you and your requirements at the right time when needed.
An investment property is “money in your pocket” that you haven’t worked for, it creates a means of passive income. A way in which you create an income is through renting and the increase in rental rates. Another way an investment property can be used is creating wealth for the investor by increasing the capital growth. Capital growth can be used by extracting equity out of the property and using the cash received to purchase another property, which in turn will create another source of rental income.
There are various tax deductions involved when it comes to investment properties, but nothing that we can live off, but you can reap the benefits of those savings.
If you’ve been in the investment game for a few years now, you should have a couple properties up your sleeve and hopefully you’ve done your research and invested in various locations as well as different property types such as houses or apartments perhaps even commercial. Each property will bring in a different source of income and works in its own way and benefits of how you will see the return on your investment.
To break it down, perhaps a property may have multiple tenants which will create more than one income or depending on the location and popularity of a property you may attract renters who are willing to pay top dollar to be able to stay within that particular area.
The rule here is not to compare, a property that brings in multiple incomes may not increase in capital growth as fast as your property that is in high demand. Think back to rule one, let your property do the work they are each unique and specific in what you require from them, that’s the reason you invested in such particular properties.
Capital growth is a number, even though you can say your property has doubled in value, you’re not living off that growth, so there’s no need to compare which property is better, just appreciate that your investments are working.
Do you really need to sell?
Lastly, ask yourself first, why do you want to sell? If it’s due to capital growth and it’s not what you expected, refer to rule two and revisit the type of property and what the main purpose for purchasing that property was for.
For example, if your rent is not what you require and it’s having you pay out of your own pocket the mortgage repayments, it’s still best to reevaluate the situation and if you see potential in what can change to meet your expectations before you decide to sell.
You may want to consider and ask yourself
- What is stopping the rent increases?
- Is it something that can be fixed?
- Can you improve the property’s ability to attract higher rents?
There’s a motto that successful investors live by, “Buy well, Never sell”
It all comes down to what outcome you want at the end of the day, and if selling that particular property now, would it meet those expectations, or would you be losing out on the wealth from any capital growth you may have received because you jumped into selling when it wasn’t the right time.
As a homeowner or investor, having a good understanding of the property market is important and it’s just as important that no matter the property at the end of the day you want to have a good return on your investment with the potential of your property increasing in value in the future. All this comes down to understanding and implementing the three golden rules and most importantly in addition the best tool to have as a property owner/investor, is a Property Valuation!
A comprehensive detailed report of the property that will give you the current market value of your property as well as a breakdown of the property market in the area, and any external factors that may come into play. Giving you the upper hand on your property’s potential and where you stand financially.
John Anderson is one of Melbourne’s leading experts in commercial and residential property valuation services. John is a registered Chartered Surveyor and Senior Property Valuer with over 20 years of professional experience providing property valuations across Melbourne and Victoria. His in depth expertise in real estate and property has allowed him to share his specialised knowledge as an authority keynote speaker at conferences and universities across Melbourne.