You’ve had a great run in the marketplace.
Your properties have nearly doubled in value in a very short time, so is now the time to sell and look for better opportunities?
If you’ve been investing in some of the major capital cities in the last three to five years like myself and my clients have, you’ve probably made some massive gains on your initial investment.
That’s fantastic. But a lot of my clients are now asking whether they should be taking the profits and banking them while they can.
As a more strategic investor, I always like to question what the alternative might be.
If you’re looking to take that money and just simply put it in the bank, you’ll probably find that it’s eroded by inflation, (and the interest rates we’re being offered right now are next to nothing). You will also be faced with capital gains tax and selling costs.
Leverage in property is also unparalleled. Most conservative purchases offer a minimum of 20% deposit in order to own the property. It’s rare to be able to purchase an asset for only 20 cents in the dollar, so will another investment offer the same ability to capitalise on such large gains with so little outlay?
Trying to time the market can also yield poor results, with historical data showing us that some of the best suburbs move through incremental jumps of three to five percent at times that are hard to predict.
That sort of growth can add up over time, and if you’re out of the market, then you don’t get that advantage. Many investors often end up waiting until the biggest gains of twelve to fifteen percent have occurred, only to find that the suburb has had most of its growth already.
On the other hand, if you think that the property is not performing and may not do anything for the next 10 years, then you may be actually better selling that property. After all, the opportunity cost of not being able to put your money elsewhere could be huge over that period.
So if you are looking to take your profits at what you believe is the top of the market, think about where that money is best spent. You may be better off keeping an asset that has great long-term fundamentals and waiting for the tide to turn, which it inevitably will.
Many investors have regretted selling their properties over the years, but not too many have regretted holding onto them.