You have just received the dreaded call that your tenants are moving out. Is now the right time to look at selling your investment property?

The short answer is… Not if you can help it. You probably bought your investment property with the long-term goal of making some capital gain and/or providing yourself with a semi-passive income of sorts. Hopefully, that is what has been happening. If your property is negatively geared (ie. losing money each week) then hopefully you have at least experienced some capital gain over the past few years.

Time and length of ownership are your best friends when looking to obtain a return from any form of property.

However, there are scenarios where selling an investment property could make sense.

9 Reasons it could make sense to sell your investment property:

1. You are nearing retirement.

Within the blink of an eye early 60’s has hit and you start to think about freeing up cash to do the things you will enjoy when you are no longer working. All of a sudden, your nice 4 bedroom investment in the suburbs worth $900,000 and returning $775 per week doesn’t look as enticing as the 3 flat property for sale for $825,000 and returning $1100 per week.  As your income reduces that extra $325 per week will go a long way.

2. You got in a little too deep.

Are you struggling to cover the mortgage payments/maintenance expenses/rates/insurance? It happens for multiple reasons. Maybe while the property market was climbing in value you thought you would stretch yourself and buy one more investment property in the hope of making some easy capital gain/equity? Now the market has changed, and you realise that you may be staring down the barrel of a flat market for the foreseeable future while topping up the property by a couple of hundred dollars a week

Don’t miss a single step in the process. Fill in your details below and download our:

“41 step preparing for sale checklist”

3. You are outside the bright line test.

If you bought your investment property before 29th March 2018 and have owned it for at least 2 years, then you may be able to sell your property without paying tax on any capital gain.

From the IRD website – “If you entered into an agreement to purchase residential property on or after 29 March 2018 and sell it within 5 years, you’ll need to consider if it is taxable under the bright-line test. If a property was purchased on or after 1 October 2015 through to 28 March 2018, the bright-line test will look at whether the property was sold within 2 years. The bright-line test doesn’t apply if the property was: your main home. transferred as part of an inheritance, transferred to you as an executor/ administrator of a deceased estate.”

Please get appropriate advice from your accountant before making any large property decision.

Click here to read more on the bright line test (IRD website link)

4. You want to start a business.

You may be starting an exciting and potentially profitable business that needs an injection of capital to get off the ground. Weigh it up, is the reason you brought an investment property all those years ago for this very event? If that is the case then it could make sense to sell.

5. You encounter an unexpected event.

You may have the unfortunate experience of being diagnosed with a sickness that requires money for treatment. Again, is the reason you bought an investment property for this exact type of situation? There is absolutely zero point in owning a bunch of investment properties if you are not alive to enjoy the benefits.

6. Reduce the interest you are paying on your owner-occupied mortgage.

Although there is nothing wrong with being in debt, you may be at a stage in life when reducing the mortgage on your personal home (by selling your investment property) is worth a lot to you. The reduction in debt might free you up to travel. Or it might allow you to take a more relaxing job and chase better life balance.

Note: Speak to an experienced accountant about all the options available to you before making this move.

7. Your property is underperforming.

Perhaps the home you brought just isn’t stacking up. Large sums may be going towards maintenance. or Sometimes you realise after owning a property for some time that due to its location/lack of sun/access etc that it just isn’t achieving the gains you thought it would. Maybe it has been a difficult property to rent out? These are all reasons it could be easier to sell and invest your money in a “better” property.

8. You have a better place to put your money.

It is no secret that property isn’t the only place that you can try and grow your money. You may have other investment opportunities you want to pursue which you believe could provide a better return on your money.

9. You are losing sleep over it.

As human beings, we have different skills in different areas. Some people just don’t enjoy being a landlord and dread receiving that phone call to say a tap is leaking, the dishwasher has given up the ghost or even worse, the tenants have done a runner. If it is all causing you unnecessary stress it may be easier to put your money elsewhere.

On the day of writing this, I am heading out for the third time in a very short period to fix another small item in a property I own (dishwasher, door handle mechanism, leaking/loose sink tap and the letterbox coming off its stand). Owning an investment property can take up a lot of your time.

Case study: 6 Downing Street, Crofton Downs.
Read about an investment property we recently sold. The owners received 10 offers in 3 weeks and ended up selling for more than 70% above RV.



In Summary

Holding property long term has helped countless Kiwis achieve financial independence.

Not all of us are cut out to be landlords though and sometimes selling can be the right option. Especially if you have something more important to spend the money on instead.

Whatever you choose, make sure you speak to an accountant or get the appropriate financial advice before making any major property decision.

As always, you are welcome to get in touch with us at Relatable to chat about the market, ask questions and perhaps get an opinion on what you might be able to sell your investment property for in the current market.

Kahn May
Co-founder @ relatable

What’s next?

Don’t miss a single step in the process. Fill in your details below and download our:

“41 step preparing for sale checklist”