The Great Property Debate: Hold Or Sell?
Insights on Timing and Strategy for Optimal Returns
We’re AUS Property Investors, your money mechanics – fine-tuning investments until they purr like that dream car of yours!
This Month’s Run Down:
🕵️♂️ BBQ with Gerry Harvey
🥋 Mortgage Kombat: How to keep your portfolio growing
🏦 The rarely talked about private banking realm
💸 The best price to buy commercial in 2024
💡 How to solve your lending problems
🏠 The Great Property Debate: Hold or Sell?
🧰 FREE Property Tool Of The Month
Gerry Harvey's Property Secret:
Hold or sell?
Ever heard of Gerry Harvey?
Sure, you know him as the mastermind behind Harvey Norman, but did you know he's also a real estate tycoon? With a net worth of around $2.1 billion, Gerry is ranked #25 on Forbes' list of Australia's 50 richest people.
And the other day, out of the blue, I bumped into him at a BBQ.
Ah, yeah, not really…….. But imagine if I did!
You'd probably expect him to drop some golden nuggets of property wisdom.
You might ask, burger in hand. "So, Gerry, should I hold or sell my property?" If you actually ran into him, he'd likely tell you to get lost at this point. But in my version of the story, he'd chuckle and share some tales of his property adventures, reminding you that timing is everything in real estate.
Hold or sell? That's the million-dollar question.
If you're in for the long haul, holding onto property might be wise, banking on potential appreciation. And that is the advice you most often hear.
Buy and Hold Forever!
But selling could be the ticket if you need liquidity or market trends signal a downturn.
Why sit in a declining market when you can jump on the next winner? Sure, there are costs, but it might be worth it!
In this month's newsletter, we're exploring the pros and cons of holding vs selling.
Gerry Harvey would approve and tell you to subscribe to the AUS Property Investors YouTube channel so you never miss a property beat HERE
"Pure Gold", I hear him mumbling as he's taking another bite of his burger.
For The Newbies
A very warm welcome to all the new subscribers! We’re thrilled and honoured to have you as readers and truly appreciate your thoughts and feedback 🙏.
Each edition of this newsletter will contain a deep dive into the property experts, investors, and all-around legends that grace us with their time and energy for the Facebook lives we run in our Facebook Group Aus Property Investors.
Now Australia’s Largest Property Investment group with over 75,000+ members!
For those who need a catch-up when they aren’t free for an hour [or sometimes 2] at 7:30 pm Wednesday night (we know we’re not), we created this newsletter, along with recording the sessions on our Youtube channel.
If this has any value for you at all, feel free to share and forward this newsletter to a friend!
That helps us a lot in bringing the best property guests Australia has to offer!
July Live Guests!
Morgan Bushell
Morgan is a Sydney-based Mortgage Broker, Director & Founder of Full Circle Finance. After completing a degree in Economics and holding many frontline banking roles, he decided at the age of 31 to take the next big step in his career by leaving a ‘comfortable’ 10-year corporate career at Australia’s best-known bank, Commonwealth Bank to pursue his passion in property and finance. He has managed to buy 5 properties with a starting capital of $40K, now worth millions!
During this session, our discussion centred around HOW THIS PROPERTY INVESTOR, FORMER PRIVATE BANKER, AND NOW BROKER is starting to buy more property, with the juicy details unpacked along with heaps of lending gems 💎!
Morgan: "The reality is that even small lifestyle changes or adjustments in how you manage your finances can significantly impact your borrowing capacity. It’s about being creative and proactive in finding ways to improve your financial position and keep investing "
This is a teaser of the gold 🏅 that we discussed in the Mortgage Kombat: How This Investor Keeps Growing The Portfolio!💰 episode that can be found by clicking the link below 👇
Ajith Thazhath
Ajith Thazhath is currently a Private Client Director at NAB Private, bringing experience from previous roles at Commonwealth Bank and American Express Australia. With a robust skill set that includes Financial Analysis, Financial Modeling, Essbase, Variance Analysis, Financial Planning and more, Ajith Thazhath contributes valuable insights to the industry.
In this session, we focused on unpacking the rarely talked about realm of private banking giving the audience an understanding of how it can help grow and expand your investing!
Ajith: “In private banking, the benefits of lending are quite different from
those in retail space. In retail, it is very black and white—you show your pay slips, you get a loan based on your borrowing capacity. In private banking, it's more about understanding the client's broader financial landscape and crafting solutions that align with their long-term financial goals.”
This is a glimpse of our discussion, and there are tonnes of valuable insights into How Private Banking Can Help You Grow Your Property Portfolio! episode. Dive into the gems 💎 by clicking the link below 👇
Steve Palise
The “Steve Palise”, Owner of Palise Property is a Licensed Real Estate Agent who has acquired a huge property portfolio that allowed him to leave the workforce before the age of 30. As an experienced Buyer's Agent, he has helped thousands of clients through successfully sourcing quality commercial and residential property investments across the country in metropolitan and regional areas.
Steve is passionate about helping others to achieve their goals and financial freedom through property investment.
This session’s conversation revolved around The Price Points That Are Working For Commercial in 2024, The What, Where and How Much along with so much more!
Steve: “The demographics of an area can dramatically influence commercial property investments. For instance, an area with a growing population and rising incomes will have different commercial needs compared to one experiencing a decline. Understanding these trends is essential for selecting properties that will maintain or increase in value over time.”
There are incredibly valuable insights in the "The Best Price To Buy Commercial In 2024!" episode. Explore the wealth of information by clicking the link below 👇
Aaron Christie-David
Aaron Christie-David is an MFAA approved Mortgage Broker with over 8 years experience helping clients He is the Managing Director of Atelier Wealth, which he co-founded with his wife Bernadette several years ago.
Aaron is highly qualified and has a wealth of knowledge and experience in the Finance Industry. As the Managing Director of Atelier Wealth, Aaron has been ranked among Mortgage Professional Australia Magazine's Top 100 Brokers for the past four years
In this session, we dived deep into How An Experience Mortgage Broking Property Investor tackles the key lending challenges to help you solve your lending problem including some exciting live examples!
Aaron: “I think the big lending problem essentially is people, they get stuck, they hit the serviceability wall after two to three properties, and you can actually overcome that by getting in early and understanding what these problems are”
If the above 👆 summary of our conversation has sparked your interest, discover all of the amazing golden nuggets in How To Solve The Lending Problem! episode by clicking the link below 👇
Jeremy Iannuzzlli
Jeremy Iannuzzelli, Expert Account has over 15 years of experience dealing with small to medium business enterprises along with his bread and butter property investors. In addition Jeremy has managed to build a 20+ Property Portfolio worth $17 million and combines a unique skillset of an intimate tax knowledge with an ability to execute on his own profitable Property Deals!
His core focus is helping property investors create effective tax structures in line with their goals and objectives while providing sage insights on how to grow their Portfolios.
In this session, we dived deep into The Inside Scoop on How To Assess and Evaluate Multiple Types of Property Deals to Outperform the Market!
Jeremy: “You need to make sure that you're looking at both sides of the financial accounts because if you're going down a Capital Growth path where you can't simply continue to afford to keep the properties because you're chasing this Capital Growth, this balance sheet amount of gain that you're making, you won't be able to hold your properties for the longer period of time.”
If the above 👆 summary of our conversation has sparked your interest, discover all of the amazing golden nuggets in The Truth Behind The Numbers: How To Outperform the Market episode by clicking the link below 👇
The Great Property Debate: Hold or Sell?
Investing in property is a wild ride. You jump in, eyes sparkling with dreams of passive income and long-term wealth. But sooner or later, every property investor faces a tough decision: hold or sell? It's a choice that can make or break your financial future.
We’re all told “Never Sell!” but is that based on fact? Are the selling costs, capital gains tax and expenses all that bad ?
So, let's break it down and not mess this up!
The Case for Holding
Holding onto your investment property often feels like a safe bet. The idea is simple: sit back, relax, and watch your property value soar over the years.
Pros of Holding:
Long-Term Appreciation: Property values tend to rise historically. This CoreLogic report shows a staggering 453% increase in Australia’s house values over the past 30 years. That's some serious growth!
Tax Benefits: Negative gearing can make holding onto property financially attractive.
Positive Cashflow: The reason we’re all doing this! We want that money in the bank on a property that grows in value. Also, rates aren’t always at 6.5%, just 15 months ago they we in the 2% range.
It’s easy! Set, forget and count yo dollars.
Cons of Holding:
Market Fluctuations: Property markets are like roller coasters. There will be peaks, but there will also be valleys. Are you prepared for the ride?
Opportunity Cost: Holding one property means you might miss out on other lucrative investments. Some markets crush it in a short period and then stagnate. Is it better to sell and move on?
The Case for Selling
Selling might feel like admitting defeat to some, but it can be a strategic move. The reason being, we only have so much borrowing capacity and cash.
Pros of Selling:
Capital Release: Selling frees up capital, allowing you to reinvest in higher-yield opportunities.
Avoiding Downturns: If the market looks shaky or stagnant, selling could save you from potential losses. Remember, property markets don't grow consistently; they have bursts of growth followed by stagnation.
It’s unlikely over the 30 years of ownership that there wont be a time where it would be worthwhile selling that property and investing elsewhere.
Cons of Selling:
Transaction Costs: Agent fees, stamp duties, legal fees can eat into your profits. These aren't small change and you can expect to pay around 5-6%.
Market Timing: The big one! Predicting market highs and lows is like trying to catch a falling knife. Get it wrong, and you could miss out on future gains in your current market and sit in a rubbish market.
Tax Implications: Capital gains tax can take a hefty chunk of your profit.
Long-Term Growth: A Double-Edged Sword
Let's dive deeper into that enticing 453% growth statistic from the CoreLogic report I mentioned earlier.
While this average looks promising, the reality is far more nuanced. Consider the highest growth numbers, such as Melbourne’s 519% Houses surge, versus lower growth areas like Perth, which saw only a 324% increase in houses. (The report ends July 2022, so with the recent Perth Boom, it would look differnt in today’s numbers, but let’s go with it)
Imagine you bought a $400K property:
High Growth Scenario (Melbourne, 519% increase): Your property could now be worth approximately $2,076,000.
Low Growth Scenario (Perth, 324% increase): Your property might only be worth around $1,296,000.
The difference? A whopping $780,000! This disparity highlights the importance of choosing the right market…... but also at the right time! Not every investment will turn into a goldmine, and some properties may experience prolonged periods of stagnation but it’s your job as investor to jump in at the right time.
Now, let's consider the transaction costs involved in selling a property and buying another one. Suppose you sell your $400K property and purchase a new one in a higher growth area. The costs might include:
Agent Fees: 2.5% of $400K = $10,000
Stamp Duties: Approximately 4% of $400K = $16,000
Legal Fees: Roughly $1,500
Other Costs (e.g., moving, repairs, etc.): $7,500
Total transaction costs: $35,000.
Would you spend $35,000 to make an additional $1.4 million? It sounds like a no-brainer. But remember, this is based on the assumption that the market will perform as expected, which is never guaranteed. Hindsight is a beautiful thing. However, if the numbers and trends align in your favour, such an investment could significantly outperform simply holding onto a stagnating property.
In saying that….
The decision to sell often depends on the property's potential for short-term growth. If you’re holding onto a property that has grown 60% in the last 2 years, you have had a bloody good run and it may be worthwhile moving to a market that is starting to heat up.
The True Cost: Opportunity and Transactions
Let's talk numbers. Selling and buying a new property incurs hefty transaction costs. These include agent fees (around 2.5%), stamp duties (approximately 4-5%), and legal fees (roughly $1,500). For a $400K property, you might end up spending $35K to switch investments.
However, the opportunity cost can be even more staggering. Say you hold a stagnating property worth $400K while another area sees a 10% annual growth. After five years, your initial property might still be worth $400K, but the alternative could have grown to over $644K. That's a $244K loss in potential gains!
Admitting Mistakes: The Hardest Part
Let's face it. No one likes admitting they got it wrong……For their first investment, a lot of people bought a house and land package or off the plan apartment, I bet it’s even grown! But now, might be the time to move on.
But in the world of property investment, selling may be crucial. Holding onto a dud investment out of pride can be costly, in terms of borrowing ability and also tied up capital. Sometimes, ending it once and for all is better than suffering indefinitely.
Think of it like ripping off a Band-Aid. Quick, painful, but ultimately freeing.
Evaluating Your Investment: Objectivity Is Key
So, how do you objectively evaluate your investment?
Performance Check: Regularly assess your property's value and rental yield. Is it performing as expected?
Market Trends: Stay informed about market trends. Are there signs of stagnation or growth?
Financial Goals: Align your property's performance with your financial goals. Is it helping you get there?
Practical Insights
Evaluate Regularly: Keep a close eye on your property's performance. Are you hitting your financial goals?
Diversify: Don't put all your eggs in one basket. Mix it up with different types of investments or locations.
Stay Informed: Markets change, and so should your strategy. Stay updated on market trends and economic forecasts.
Remember, there's no one-size-fits-all answer. The best decision aligns with your financial goals, risk tolerance, and market conditions.
So, are you holding or selling?
The choice is yours, and let the adventure continue!
FREE Property Tool Of The Month!
SQM Research is an essential tool for property investors, offering great access to comprehensive market data. We love it for detailed insights into property listings, rental yields, and suburb profiles, the platform is super useful for investors with FREE and reliable data.
It’s got a fairly easy-to-use interface and allows you to see what is happening in your market and the market you’re going to invest in
That’s another Newsletter Wrapped up! Thanks for reading this Aus Property Investors Edition. Let us know your thoughts, share with friends & family to get the word out to the Property Crew! 🔥