Should you sell your rental property?

With property prices up by over 30% in 2021, and predicted to flatten out or drop this year, is this the perfect time to cash up?

Let’s take a look at why you might sell – and the reasons to keep holding.

Reasons to sell

First, we may be entering a period of flat or low price growth, so it’s possible that capital gains will be weak for the next few years. Then there are the issues around borrowing: interest rates are rising; banks are being pickier about their lending; and interest-only loans are far harder to secure or renew.

Then there are the various changes that have made it more expensive to own rentals, such as the phasing out of interest payment deductibility and the Healthy Homes Standards. If you’re planning to exit the rental market, all these factors make a pretty compelling case.

Reasons to hold

But not so fast – there are also good reasons to hold onto your rental. Property is traditionally seen as a good hedge against inflation, because not only do rents rise alongside other costs of living, but inflation supports higher asset prices. Plus, any debt you have against your property remains the same, while your income (hopefully) increases, effectively eroding your debt.

If you do sell, that presents another issue. Where would you put the money you gain from selling your rental? Where would you get a return that outperforms inflation?

Consider your long-term financial goals

One of the biggest deciding factors should be your long-term financial goals. Does your rental fit into these? Is it moving you in the right direction? If so, you should keep it. And if not, this could be a great time to rethink your investments.

We can help you with analysing your rental property’s affordability, the potential returns on alternatives, and thinking about your long-term goals – so give us a call or drop us an email. We’d love to have a chat.