I own a unit in a complex of five and I noticed this week that one of the other units in the complex is up for sale.
BY VANESSA DE GROOT
Of course I was very interested to see this, because I’m keen to see how long it takes to sell, if it does sell and how much it sells for.
After informing my co-owner (also my brother) that one of the units in our complex is up for sale, he pointed out to me that when it sells, ours will be the only one that is with the original owners. You see, the unit was brand spanking new when we bought it just shy of four and a half years ago.
I realised he was right and even though I’ve toyed with the idea of selling it, for various reasons, it reaffirmed for me that we must hold on to our property for much longer.
"That’s why so many people don’t make money from property," I told my brother. "They sell too early!
You have to be in it for the long haul."
"True that!" he replied, as I breathed a sigh of relief, glad we were on the same page.
I understand why people decide to sell their properties after just a couple of years. While you might go into an investment thinking you’ll keep it for many, many years, the truth is that anything can happen.
You might be forced to sell because something else has gone awry financially and you need the money, or your co-owner (if you have one) might decide they want out, in which case you’ll have to sell if you can’t buy them out.
Life can throw any number of challenges at you and unfortunately, that may mean that you have to sell your property.
And let’s be honest – it’s not a piece of cake investing in property. Sometimes it can be hard work. There’s the process of buying that can create stress, including filling out paperwork, making sure you meet deadlines for finance etc., and ensuring all is right for settlement. Not to mention the process involved in renting the property out and making sure the property managers are doing their job, along with any dramas that might come up with the tenants and unexpected costs.
If you haven’t seen much growth in your property you might think that all the hassle – and financial strain in keeping it – isn’t worth it. You may as well pack it in, sell it up and not have to worry about it. After all, it’s not going anywhere in terms of value anyway.
But think carefully before you do that. If I had five cents for each person I’ve spoken to who has said, "the value of the property didn’t go anywhere for the five years I owned it, so I sold, but if I still had it now, it would be worth a fortune", I’d in fact have a fortune myself.
And of course there are significant costs with buying and selling a property, so if you’re going to get in and out within five years or less you may as well forget it, because those costs will eat up most of your gain. And then the hassle certainly won’t have been worth it.
We’ve all heard it a million times before, but it’s all about ‘time in the market’. Property is a long-term deal – you can’t just expect to get in and out in a few years and make your millions, being able to retire and sip cocktails on the beach (unless you’re extremely lucky!). You just need to be patient (I know, it’s very hard!) and wait. If you hold your property, in 10 years’ time you’re pretty much guaranteed to have made money. You just have to be confident, look at the history of property price growth and have faith.
I’m sure there are already people reading this and poised to click the comment button, fiercely typing things like: "yeah right, just keep telling yourself that will happen, property investors are so optimistic… blah blah blah". But the reality is that I do honestly believe that, or else I’d do the same – I’d sell up and invest in something else. And I believe those naysayers will be the ones complaining in 10 years that property is unaffordable and prices are ridiculous, and I’ll be grinning from ear to ear that my properties have grown so much in value.
I’m not overly optimistic either – in fact I’m probably one of the most cynical people you’ll come across. There’s no doubting that the property market is definitely going through a slump and there are times when I’ve wondered if it’s worth all the stress, but my underlying belief (and it’s a very strong belief) is that it’s worth it. I’m 100 per cent confident that property is what’s going to give me a stable financial future and I’m willing to stick out the bad times to reap the rewards at the end.
Tell me what you think. Have you sold a property prematurely only to find out that its value jumped not long after? Do you wish you’d held onto a property longer? Or do you think if it’s too much hassle you should just sell up and move on?
Vanessa De Groot is the deputy editor of Australian Property Investor magazine, www.apimagazine.com.au
For me, rental properties are too much hassle for little return compared to most other investment opportunities that I am able to pursue. I made my money many years ago in business and I have since invested my cash into commercial property via wholesale syndicates and also in shares via placements at discounts to the market.
Most people reading this probably don’t like hearing it, but real money isn’t made by investing in residential property at prices that anyone can pay for – that’s middle class mentality. I think people need some real exposure on how the wealthy make money, and it isn’t via buying and holding residential property.
Comment by Jeff — September 10, 2011 @ 6:24 pm
No need to brag about yourself Jeff but I slightly agree to some extent. Residential investment is definately seen as mickey mouse by the big end of town. I suppose its unfortunate that unsophisticated investors will never get exposure to decent investments and therefore end up buying residential units/houses because they have no alternative. Yes the rich get richer but life was never meant to be easy.
Comment by Philip — September 11, 2011 @ 2:26 pm
If you are going to panic, panic early. Now is the time to sell. Sellers have about a 3 month window while they have still some liquidity ramaniing in the market. Thats what the hubby has been telling me anyway because we are in the process of cashing out and selling our 2 investment properties. We are in our late 50s, so the cash is important to us. We cant be bothered with the stress of this falling market into our retirement years.
Comment by Karen — September 13, 2011 @ 2:33 am
The best time to buy property is always ‘yesterday’.
The best time to sell is ‘IN A HOT MARKET’ if you sell now you will lose money.
If you hold, how much is it really going to cost you? Karen, in your late 50′s you still have time to wait for the market to go back again. It wont take long! Bothered with stress of a falling market” – what stress, hold and you wont even see its a falling market: prices only drop if you sell in a flat market!
Smart investors are buying up big as its only desperatos selling (financial stress / divorces / deceased estates etc) and there’s plenty of bargains!
Rents are increasing everywhere. My advice, hold on & ride the wave!…
Comment by Louise — September 13, 2011 @ 9:09 am
Louise we have held both of our properties for over 15 years. We wont lose money if we sell them now, but I cant stand to see our huge profit evaporate in smoke in front of our eyes. Its all very well for you to say ‘hold on tight and close your eyes and you wont even see its a falling market’….what sort of strategy is that?
Of all the friends and family we have told about us selling our properties, the only people who sit there and say “no no what are you doing, hold on tight” are the people themselves who have bought within the last 5 years and are sitting nervously on no capital gain, and these people are spooked by the fact that others around them are selling and causing the market to drop further. Am I right?
Comment by Karen — September 13, 2011 @ 5:15 pm
Karen, can I ask why you think your profits will evaporate if you hold your properties? Why do you think there is only a three month window? I’m curious to know why you think the market will significantly drop.
I totally understand that there’s fear out there – we’ve all had moments of uncertainty – but I’m concerned that if you sell now, you’ll lose money and in a few years time when property has picked up again, you’ll be regretting that decision. Time will tell I suppose.
The majority of people out there are certainly worried about lots of things in the world today – will they have a job tomorrow, what impact will the carbon tax have on our economy, what will happen overseas and will that affect us… but my advice would also be to look at the fundamentals of the market rather than listening to everyone out there that’s scared at the moment. They’re watching the news everyday and seeing lots of negativity… but in reality, Australia is doing well and there’s no great reason why that would change. The majority of people are too scared to invest full stop and they may also be the ones telling you to sell… make sure you look at the fundamentals before you do so. Those people may also be the ones in 10 years’ time saying they wish they’d bought 10 years ago…
Comment by Vanessa De Groot — September 14, 2011 @ 11:13 am
Karen I think you’ve mentioned your biggest problem- listening to family and friends. How much property do they own? I was taught to only listen to people who have what you want (obviously they know how to get it).
Advice you get at a BBQ is not what you should be listening too.
In 2008 I was looking at buying an inner city (Sydney) apartment. The market was bad. Everyone was saying don’t buy. Friends said “the only one saying buy now is real estate agents”. I bought a nice little apartment heavily discounted with a great yield. It’s gone up 50% since then and the rent has risen to make it cash flow positive. Lucky I didn’t listen to those who knew nothing.
Comment by Lynne — September 15, 2011 @ 5:49 pm
Dont worry about me…we bought the houses 15 years ago and we will make a huge capital gain regardless of what market we sell into (according to their recent valuation).
And NO, it wasnt the opinions of family and friends that we based our decision to sell. We want to sell because we are using the proceeds to invest in some better investments (some solid commercial freehold and and share in a successful business). We honestly dont think there is any more money to be made in owning rental houses compared to the many other fantastic investments out there in the big wide world that are available to everyone. And that is entirely our opinion…not that of our esteemed friends and family.
I only made the comment as I think its funny watching other peoples reactions when we tell them we are selling our investment houses. The people who say ‘NOOOO dont do it!!” are always people who own investment houses themselves, and particularly those who have bought recently.
Comment by Karen — September 16, 2011 @ 2:23 am