Seven steps to decide if you should sell your investment property

Many property investors are weighing up whether or not to retain their real estate assets and interest rate rises are only muddying the waters, but there are some tips to adhere to in making the big decision.

Couple look at apartments from outside.
Property hold or sell decisions may come down to age. (Image source:

Over the past couple of years we’ve experienced record rent increases, record low vacancy rates and record numbers of new immigrants, all things you would expect to encourage property investors to leap into the market in record numbers.

Instead, they’re selling up.

Rising interest rates have played a part, of course, but the main catalyst appears to be investor-unfriendly legislation, with Victoria and Queensland leading the exodus.

The decision to sell an investment property is not one to be taken lightly.

The process of selling a property involves many factors that require careful consideration.

Here are seven crucial steps to take when contemplating the sale of an investment property.

1. Start with the "Why"

The first and most fundamental step in deciding whether to sell your investment property is to ask yourself, "Why?"

What is motivating you to consider selling? Is it because you believe property prices have peaked, you’re concerned about the cost of holding the property, or are you worried about potential interest rate increases?

If any of these reasons are leading you to consider selling, you definitely need to read the rest of this article.

Each of these concerns is short term and reactionary, whereas I’m hoping you bought an investment property with the long term in mind.

2. Understanding market conditions

Property markets operate in cycles and it’s tempting to think we can time our buying and selling in order to maximise our gains. However, predicting market peaks and troughs can be challenging as no two upswings and downturns are alike.

The property market is often described as a clock, with 12:00 representing the peak and 6:00 as the bottom. This metaphor serves to remind us that good times will follow bad, whereas when we focus on the short-term pain in those bad times, we often forget that we can ride them out.

The truth is that market booms are rarely one-off events, with the exception of mining towns, of course.

While it might seem like prices have reached their zenith, historical data shows that property values tend to trend upward over time, even with occasional downturns.

Despite headlines and media hyperbole, across the majority of this country there's no mythical cliff that prices are going to fall off and the outlook for 2024 at the very least is promising.

3. Assessing the asset calibre

That said, the market data I just referred to is aggregated, which means it does not reveal the performance of individual properties.

Any decision to sell or hold a property should be made with full knowledge of whether or not you own a good asset.

Not all properties are created equal, and it’s important to recognise and accept the reality of your chosen investment properties.

I categorise properties as “flyers” (top performers), “floaters” (average performers), or “flops” (underperformers).

I recommend trying to retain “flyers” and divest of “flops”, but when it comes to “floaters”, a number of other factors will come into play, for example, your stage of life.

If you are at retirement age and your “floater” is debt free and providing a good income, you might decide to hold.

On the other hand, if you are in your early 40s, with a couple of decades of well-paying work ahead of you before you retire, the opportunity cost of retaining a “floater” instead of upgrading to a “flyer” could present a clear case for selling.

4. Your investment plan: evaluation and revision

It is crucial to benchmark your property's performance against your initial goals as well as other investment options you have forgone. Are you experiencing the growth you anticipated?

Reflect on your original intentions when you purchased the property. Have your circumstances changed since then?

Assess whether your current goals align with your investment property’s performance. Be open to revising your plan to match your present situation and objectives.

5. Have the right advisors

Engage qualified advisors such as accountants, financial planners, conveyancers, mortgage brokers, and property advisors. These experts can provide insights on the financial implications of selling, the timing of the sale, and tax considerations.

One of the challenges in getting good property advice is the lack of regulation in the space.

This leads to some advisors stepping out of their lane. I’ve heard plenty of accountants and mortgage brokers give property advice, for example.

I encourage you to seek out a QPIA (Qualified Property Investment Advisor) to have on your team and ensure your advisors work cohesively to provide you with a holistic overview of your situation.

6. Timing the Sale

It’s not always a good time to sell and with some properties you need to carefully choose your moment.

Understand the seasonality of your local property market and how that intersects with general market conditions. The ideal time to sell may not necessarily align with conventional wisdom, such as the spring selling season.

Be mindful when seeking the advice of sales agents as most inherently believe it’s always a good time to sell. That’s how they make a living, after all.

Analyse metrics such as auction clearance rates, vendor discounting and days on market in your area to make an informed decision about when to list your property.

7. Choosing a sales agent

Selecting the right sales agent is crucial for achieving a successful sale. Look for local specialists with experience and a track record of delivering results.

Get three appraisals, ask about their opinion on price and ensure they provide you with evidence for their estimate.

You’ll also want to know their recommended method of sale and marketing strategy. A skilled sales agent can guide you through the selling process and provide valuable insights that will allow you to maximise your sales result.

Deciding to sell an investment property is a significant decision that should be guided by careful consideration and analysis. By following these seven steps, you can better understand the validity of your motivation for selling, assess market conditions, evaluate the calibre of your asset, align your plan with your goals, engage the right advisors, time your sale appropriately, and choose a reputable sales agent.

Taking the time to work through these steps will serve to protect you from a poor sales experience, or, even worse, selling and later regretting your decision.

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