Blink Property
There are a lot of investors currently being tempted by real estate agents who are short of stock to sell on the market and offering big sales results and databases full of desperate buyers.
This happens every time there is a property boom, which is often fuelled by a shortage of property available and plenty of demand from hungry buyers.
No stock on the market equals nothing to sell for real estate agents, which of course means no commission.
So if an agent comes knocking on your door, wanting you to sell your investment properties, remember that it’s not to do you a favour, but to keep themselves in the money.
Hey, everyone’s got to make a living, so you can’t blame them. But before you let them convince you to sell, think long and hard about what it would mean for your goals.
Property prices have risen significantly across a lot of markets over the past 18 months in Australia and are likely to keep rising until the end of this year and even beyond.
The value increase means an agent can come to you offering to get you a great price on one or more of your properties and actually be telling the truth.
Double digit growth in multiple markets this year can translate into impressive equity gains.
Having a bit of money dangled over your head can sound tempting.
An agent might call you up and say “hey, you bought this property for $200,000 a year ago. I can get you $250,000 or more straight up”.
That’s a big gain for just one year on a property at the affordable end of the market. But wait a second. If you sell, sure you could make $50,000 on the original purchase price, but don’t forget you also paid stamp duty on the property, legal and accounting fees, inspection report fees, maybe a buyer’s agent who helped you find it and, once it’s sold, you will pay tax on that.
Not much of that $50,000 left over all of a sudden is there?
The important thing to ask yourself when you’re buying a property is ‘what is my strategy? What am I trying to achieve and what is that property doing for me?’
OK so you might make some decent money by selling in this market, but how does that really help you get to your goal?
Remember, the day you sell an investment property is the last day that it makes you any money. The gains of future market cycles, the rental returns that increase with inflation while the debt remains the same, it can all add up to hundreds of thousands or even millions of dollars.
The $50,000 that the property might have made so far is still there for you to use as equity without having to sell.
In this market you might be able to bump up your rent by $50 to $100 a week, depending on where you are. That’s $5000 a year. Got a few properties in your portfolio? Multiply that amount of extra money. You can increase your cashflow and have more money each year coming in on your properties.
Imagine if you sold your asset at the start of a boom.
Sometimes you can buy a bargain property from someone who has held it for 10 years and they end up selling for less than they bought it. They’ve been a surrogate carrier of an asset for you. They bought it 10 years ago with negative cashflow and now they’re selling it and it has positive cashflow.
That’s terrible timing and the wrong kind of mindset to be a property investor.
Right now, we’re about to see a boom. If the market doubles in the next 12, 24, 36 months or 5 years, you’ve had minimal risk for maximum return.
Imagine selling your property now and then finding out five years later someone sold it for two or three times as much!
If agents are harassing you to sell, look for a second opinion. Talk to Blink and ask what we think about it. If you really want to sell, we can put you in touch with someone to help you get the maximum result when you do. In the meantime, we can look after your rental property and make sure you’re getting the right return. As prices keep rising and everything is getting inflated, the greatest thing in an investor’s life to get inflated is rent. The increase in the cashflow that comes through can make all the difference to your portfolio.
Contact The Blink Property Team
