The Three Essential Rules for Selling an Investment Property

Selling an investment property is a significant decision, and just like in other areas of life, following the right rules can help you make the best choice. These rules aren’t just about guidelines—they’re about common sense. By following these principles, you can ensure that you’re making the right move and getting the best possible outcome when it’s time to sell your property.

Rule #1: Let Your Property Do Its Job

Property investing is not the same as property development or flipping houses. As an investor, you’re not necessarily looking for quick gains through renovations or resale. Instead, your goal is to build wealth passively. Investment properties create income primarily through rent, and they often increase in value over time, offering you a solid long-term return.

While you may not live off the capital growth immediately, you can leverage it by pulling out equity and reinvesting in another property, thus generating additional rental income. Additionally, investment properties offer various tax deductions, which, while not directly providing a living income, can result in substantial savings.

If your property is generating consistent rental income and is holding its value without requiring much from you, it’s doing its job. In such cases, holding onto the property for the long term is often the best decision.

Rule #2: Avoid the Comparison Trap

If you’ve been investing for a few years, you may have several properties, each performing differently. Some might offer multiple rental streams, while others are in prime locations where rents are high. However, it’s important not to compare properties that have different functions. For example, a duplex providing two rental incomes might not experience the same rate of capital growth as a single apartment in a booming location. But remember, your duplex is generating steady cash flow, and that is what matters most.

Capital growth is nice to track, but it’s not the main goal for every property. If your property is performing well in terms of cash flow and rental increases, it doesn’t necessarily need to have the same capital growth as other properties. Stop comparing and focus on what works for you.

Rule #3: Think Carefully Before Selling

Before making the decision to sell, ask yourself why you want to sell. If you’re disappointed with the capital growth, refer back to Rule #2. However, if you’re not satisfied with the rental income and find yourself topping up the mortgage out of pocket, it’s time to stop and think carefully.

Look at what might be preventing higher rents. Can improvements be made to the property, such as a new kitchen, bathroom, or even a granny flat? Sometimes small upgrades can significantly increase rent potential. Weigh the cost of improvements against the long-term rental income and think about how they will impact your returns over the next 15-20 years.

The motto “buy well, never sell” is a key strategy for successful property investors. The expenses involved in buying and selling properties can be high, and selling too soon may limit your wealth-building potential. Always consider the long-term implications before deciding to sell.