One of the hottest decisions to make as a property investor is to decide when should
you sell your investment property. Hi, I'm Ryan McClain I'm from positivecashflowaustralia.com.au,
and today we're discussing when you should sell, when you should keep, and also some
things that you can do if you don't decide that you're going to keep your property and
how can you maximize your portfolio, why do people sell their investment properties, why
don't you just buy and hold it forever because if it is true that property doubles in value
every seven to 10 years wouldn't it make sense to just hold every single property buy and
keep accumulating them. From what we learn from the game of monopoly
what do you do there you buy three green houses and you trade it in for red hotel, the people
have been doing this for centuries by buying properties growing their portfolios selling
their portfolios investing in commercial property or different types of properties in larger
properties as well. People will often sell their property not
necessarily for great reasons they might sell it because the price has dropped and they're
worried it's going to keep dropping. They might sell it because they need money to decide
they want to go on a family holiday or they decide that they can't afford the property
anymore, that they are going to have to sell the property.
Maybe the price is been stagnant for some time I went to a positive real estate investment
class I guess you will call it a seminar or night meeting you can check them out at positivereealeastate.com
.au and they hold a bunch of nights but they were talking about one of their students who
had actually owned a property in, I think it was in port Stephens or something like
that just North of New Castle and that they hold it for years and nothing had happened
with it that they've sold it because the market has been stagnant for so long and then in
within the next year that property went up over $100,000.
Sometimes people sell it because it has been stagnant but they don't realize that the property
markets actually about to go through a massive boom. People often sell because there are
some opportunity of a life time when I was growing up a neighbor from across the road
decided to, she didn't sell but she mortgaged her house to invest in the stock market which
was going gang burses at that time and believe it or not but she lost all of her money ended
up having to sell her property because she was chasing the opportunity of a lifetime.
Number five the scare of market changes just sometimes the property might be performing
well but the scared that the markets is going to drop and that they sell out so there's
no risk for them. I can't tell you when you should sell your
property because at the end of the day comes down to your investment plan, comes down to
your individual property, comes down to your financial circumstance, and what you want
to achieve. I cannot tell you exactly when you should
sell but what I can give you is five tips to determine whether the selling is the right
decision for you and when you should sell your investment property or what you could
do if you decide not to sell. Tip number one, which is the tip I learned
from Steve McKnight who wrote zero to 130 properties in 3.5 years very famous books
of hundreds of thousands of copies you want to check that out is pcea.im which is my short
link forward slash the number 130, pca.im forward slash 130 would get you that book.
He said stop analyzing cash on cash returns because obviously let's say you've invested
in a property 20 years ago and it has doubled twice you bought it for what $200,000 is now
worth 400 now $800,000, let's say you put down a 20% deposit of $40,000.
If you are analyzing the cash on cash return of the $40,000 but you've got $600,000 in
equity, well then it's not really an accurate prediction or estimate of what you actually
achieving, all of this are equations that you us in finance in real estate, cash on
cash return on investment and equity. All of that sort of stuff the whole goal of
those terms and the fractions and the equations is to give you an idea of how your property
portfolio is performing but if you are using the wrong equations and you are using cash
on cash returns when you've got bucket loads of equity well then even though the cash and
cash returns redoculance because you invested 20 years ago, the property is now four times
as much, you may not be getting the best return on your investment given the amount of equity
you have. Stop looking at cash on cash return if you've
own the property and you've got a lot of equity but start looking at what's my I guess cash
on equity return or return on equity in the property and if you can then you start looking
externally as well and say well the return that I'm getting with this existing property
if I reinvested that equity can I get a better return somewhere else, this is the kind of
thought process that you want to go through if you are looking into invest looking into
sell your property. Number two is to continue to imagine what
you could do with the money, in holding a property holding any asset on anything that
has financial value there's always going to be what's called an opportunity cost and that
is the cost of a better opportunity appearing somewhere else.
The fact is you got your money tied in one investment, but if it was in another investment
that's an opportunity that could be performing better than you could be missing out on a
great deal of money, even when you own property even if it's a performing all right or maybe
not happy with it but keep looking in the market, keep seeing what's happening keep
learning keep finding out better ways to invest because just because you bought that property
20 years ago doesn't mean you knew everything you knew about property investing today 20
years ago. Maybe you can learn more and invest better
in the future, keep imagining keep looking at what's out there in the market.
Number three is to understand property cycles again I learned this from positive real estate
and that was the fact that property goes through cycles, we have our booms we have our bursts
when the market drops, we have the bottom of the market where things are kind of very
stagnant and they're just kind of sitting in the bottom of the market and then you've
that kind of season of what they call gentrification where properties are increasing of value and
it goes back in to the boom again as well. Understanding way your property sits on the
market cycle is it in a boom maybe it's time to sell and cash out and then buy back at
the bottom of the market, you need to understand what cycle you are in and all over Australia
we've got different cycles happening, in the moment Sydney is going gang busters, it's
probably in a boom where is all the capital cities or other towns and necessarily having
the same property cycles at Sydney's having at the moment.
By looking at the property cycles of where you are investing and other spots in the country
you can maximize the property cycle because as Sam sagas says in the we may say that property
doubles every seven to 10 years probably more likely that the property actually doubles
in maybe three to 5 u window and the rest of the time is either sitting dormant or going
backwards, something property cycle is definitely something to look at.
Number four is to buy with an extra strategy in mind or to actually create one if you haven't
got one already, instead of just buying hoping for the best just saying I want to invest
in property to make money or be financially free playing your extra strategy at that property
before you go to invest maybe you say I wanted to get to this point within 10 years and then
I'm going to sell it maybe you say I want to get to this point in cash flow and I want
to keep it and I'm going to put my money out. There are so many different ways you can do
it I'm not a financial advisor, I suggest you go and speak to a financial advisor get
professional advice on exit strategies for properties because if you understand your
exit strategy you know why you are going to invest, you know what you want to achieve
and you can make decisions based on what you are actual financial goals are.
A lot of times people decide well my property isn't doing so well should I sell it but then
you haven't given any thought to what the actual financial plan is and how all this
ties in together, by seeing a professional financial advisor putting your plan in place
as to what you want to achieve it makes this decision so much easier.
Number five is to find opportunities within your own property, maybe you just decided
okay well not quite ready to sell or if I sell I'm not quite going to make as much money
as would I've liked I think I'm going to stay put, most people stop there and they just
say okay I think I'm going stay put I'm just going to leave my property but use your mind
Robert Kawasaki who is the author of Rich Dad Poor Dad thought me that the investor
that makes it either good or bad investment and we know that because we often say a bad
investment been turned into a greater investment with a great investor unlocking the right
opportunity. As well a property that's a great investment
given to the wrong person can be poorly managed and then become a poor performing property
in a bad investment as well, by continually using your mind pushing for looking for ways
to make more money from your property how can we get more rand, how can we maybe we
can add a grand flat maybe we can do sub divisional development. What are the opportunities there
to leverage you can't put portfolio leverage your existing properties as well and we've
got a bunch of articles over at positivecashflowaustralia.com.au or my other site which was cashflowinvestor.com.au.
You can check out those two sites there's a bunch of articles about things that you
might be able to do in your property to make the return of investment the best for you,
when it comes down to the question when should you sell an investment property again it's
very hard to answer because I don't know your situation but it's important to analyze, what
are we doing with the money now, what return are we getting what are we thinking we are
going to get in the future, what are our financial goals, and then could we reinvest that money
better somewhere else, and by going through those questions you probably going to get
a better idea of whether you should keep your property or whether you should sell it.
Thank you so much for watching this video or listening to this podcast I'm Ryan McLean
from positivecashflo0waustarlia.com.au go and check us out and say hello and I will
see you in the next episode.