Why you should never sell investment property, and why you might

7 reasons to sell your investment property

One of the questions that most buyers of residential investment property ask is, “When should I sell my investment property?” The answer I always give is never! In this article, I’ll explain why you shouldn’t sell your investment property, and why you won’t want to. And I’ll also explain the seven reasons you might want to sell your investment property.

Why you’ll never want to sell your investment property

Property investment is a long game. Your goal will probably be to generate fantastic passive income. Certainly, off-plan property investment is the perfect antidote to eroding pension income. If you use a strategy of selling a property to create income, you’ll never make another penny out of that property. And, when you sell, you’ll also have a bunch of costs that eat into your profit:

  • Estate agency commissions
  • Solicitor’s costs
  • Tax on the capital gain made

You could lose tens of thousands of your expected profits when you sell.

If you own a property forever, your rental income will increase. The property value will increase. The cost of paying the mortgage interest will reduce in relevance. In other words, both your cash flow and net worth increases. You’ll be making higher net income every year as you head towards becoming a property millionaire.

As your investment property increases in value, you can release equity by remortgaging to build your investment property wealth. Your income increases and you speed towards early retirement, like Malcolm and Julie, who retired thanks to property investment just ten years after buying their first residential investment property.

So, the general rule about selling investment property is to never sell. If you’re thinking of selling, then think again. Consider your investment strategy. Speak to one of the property experts here at Gladfish, and explore ways to achieve your aims without selling out your future.

7 exceptions that prove the rule never to sell

OK, so the rule is never to sell. Like all the best rules, though, there are always exceptions. It’s a great feeling to use other people’s money to fund your lifestyle. But there are occasions when selling might be the best action to take. These seven reasons to sell investment property are why you must monitor your property portfolio. You’ll notice each reason boils down to the single overriding reason to sell: you need to release the money.

1.      A major life event happens

When a major life event occurs, you may need to consider selling a property or two. It could be something exciting, such as a new baby on its way. On the other hand, you may need money to pay medical bills or care costs after an accident, or a terminal illness could change your view of the world.

2.      You can get better income elsewhere

If your property is returning less than you can get by investing elsewhere, you might consider selling. Remember to consider the costs of selling and reinvesting into another asset, though, or you could find you’ve made a big mistake.

3.      If interest rates shoot skywards

If interest rates zoom higher, you could find that mortgage interest costs turn a positive cash flow investment into a negative cash flow investment. But, remember that interest rate rises are usually temporary. There are strategies you can employ when your property accidentally goes cash flow negative. These will help you maintain positive cash flow and retain your property to reap the benefits when interest rates fall again.

4.      You stop enjoying being a buy-to-let landlord

If you’re an investor who actively manages your properties as a landlord, and you’ve lost the energy to continue doing so, you might be tempted to sell. My first question would be to ask why you wanted to be a landlord. My second would be, shouldn’t you employ an investment property manager and enjoy your passive income?

5.      When there’s a better property investment opportunity

Property fundamentals are constantly changing. When you bought your investment property, you did so because the property fundamentals made it an intelligent investment and not a money pit. But things change. If the area where you are invested no longer exhibits strong property fundamentals, then it may be time to sell and put the proceeds into a better property investment opportunity elsewhere.

6.      When major repairs could destroy your cash flow for years

As properties age, they require more TLC. If your investment property requires some major refurbishment soon, you may do better to sell. A new roof, new central heating system, and new kitchens cost money. A lot of money. Could you recoup the costs with higher rent or a higher valuation? If not, it may be time to take your profits.

7.      There’s going to be a glut of new properties on the market soon

If the local authority permitted for widescale residential development, your property value might suffer. If there is a glut of properties available to buy, then property values are likely to come under pressure. Also, new properties find tenants more easily. You could find that it becomes more difficult to let your property, and your cash flow could suffer.

If you are thinking of selling, make sure it’s the right thing to do

So, the rule is never to sell, but there may be reasons to. Investors who sell properties often aren’t the most successful. The costs of selling eat into their profit margins, and they rarely make the money they expect to.

The reason to invest in property is always lifestyle. Passive income and positive cash flow from property investment can buy you the lifestyle you desire. Selling properties don’t provide the long-term lifestyle benefits that inflation-beating rental income and positive, passive cash flow does. You may feel the need to sell investment property, but you should always seek advice before doing so.

To discuss your property investment strategy options, get in touch with Gladfish on 44 207 923 6100. We want you to be successful in property investment, and enjoy the cash flow and profits that we’ve helped hundreds achieve to date.

Live with passion

Brett Alegre-Wood

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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