Should I Sell My Investment Property?

Question


Scott, I’m torn!

Back in 2008 I bought my first home for $126,000. I have paid it off since then and started renting it out in 2012, when I moved into my husband’s home. My rental property is now worth about $150,000 and, to be honest, I do not think it is ever going to rise much in value. The only upsides are that it is relatively easy to find tenants for it ($220 per week) and I make about $5,000 a year from it. I am considering selling and using the proceeds to invest in shares, and to renovate our home. Or should I just keep it? It would be nice to rent it to a single mum with four kids!

Ally

Scott's Answer


Hi Ally,

What an awesome achievement!

In years to come, how powerful would it be to show your kids — especially your daughters — the home that Mum saved up and bought on her own, before she met Dad? Who cares if it’s a poky little joint? Stories are powerful, especially for kids.

Having said that, if you’re not emotionally invested in the property, I’d probably sell it, cop the tax, and move on.

What tax?

Well, it’s likely you’ll be up for capital gains tax (CGT), though you’ll only pay it on any gain you’ve made since 2012 (when you moved into your current home). Better yet, that capital gain will be further discounted by 50 per cent as you’ve held the property for over 12 months.

So why sell?

Well, you’re already questioning the likelihood of future capital gains, and you wouldn’t hold on to it just for the 3.3 per cent rental yield ($5,000 a year). Besides, let’s face it, being a landlord can be a triple pain in the rump — hello renters, repairs, and real estate agents.

If I were in your shoes, I’d sell the place, make a tax-deductible donation to a woman’s shelter in your area, spend as little as I could on renos on your current home, and put the bulk of it into super.

Scott