Is it a good idea to sell your investment property?
If you are thinking of selling your investment property, is it for the right reasons?
As estate and letting agents with a vast fully managed portfolio, we are often approached by Landlords who are considering selling a property somewhere in the Sittingbourne or Sheppey area.
Cash is always an appealing proposition I know, but a short term gain often results in a long term loss, and historically that has almost always been the case when selling property.
Ask anyone of a certain age about their favourite car and you can bet the phrase “it would be worth a fortune now” will be in the conversation. Well unless they owned a 1965 Aston Martin DB5, what would be worth a larger fortune today is a house or a flat they previously owned.
I know you cannot always keep the properties you live in, but if you own investment property then selling up really should be a last resort.
Take the position of a Landlord who owned a property for a number of years and sold it 5 years ago. All sorts of factors change the profit that would have been made like where and when it was bought, what (if anything) was done to it, etc, but in most cases a profit would have been made.
The downside of selling is that the profit is reduced by the fees you have to pay to sell and it’s then further reduced by Capital Gains Tax. Finally of course the Rental income stops.
What happens to the profit? In most cases it is simply spent. We all would like a new car and a good holiday but when it’s spent it’s gone forever, and even in cases, where the Landlord hopes to hold on to their profit it’s quite hard to find somewhere to actually put the money. With interest rates at an all time low, putting the money in the Bank is certainly not the answer and stocks and shares are an unknown quantity for all but the bravest.
So what if the Landlord had not sold? Well in the last 5 years average property prices have, (according to the Office of National Statistics), increased by well over £50,000 and with average rents at a all time high, the Landlord could have received a similar amount in rent.
So there you have it. If you sell today, you lose any further capital appreciation, your rental income and in most cases you will have little to show for it other than a big car and a big tax bill.