Do not sell your investment properties unless you absolutely have to.
That’s the advice of Bill Rawson, chairman of Rawson Properties, who says one of the biggest mistakes made by residential property investors in the past five years has been to sell out far too soon.
“In the past few years,” he said, “we have seen many people move into property investment for the first time – and, judging by the value increases in our group’s development schemes, they are doing very well out of it.
“However, all too often they are so dazzled by the profit that they can make in three to five years that they sell – even though at that stage they have no urgent need for the extra cash.
“This is usually a mistake because it is usually only after four or more years that the monthly rentals start to cover the bond repayments in full. Furthermore, they have to pay capital gains tax on the units they sell. It makes far more sense to hold onto the units and leave them to one’s heirs to decide whether to sell or not.”
The “regret factor”, says Rawson, may have something to do with many people’s decision to sell prematurely.
“Although the properties that they bought four or five years ago have appreciated significantly in value, they consider the property boom now over and decide to pull out of property and go for alternative investment channels such as the stock exchange or the money market, as they believe that these can offer better returns on their investment.
“However the course that I and many of my franchisees have followed has been to carry on buying throughout our lives, using the existing partly or fully paid up properties as collateral on the new buys.
“Then provided you buy sensibly and stick to the lower and lower middle price range units, you really cannot go wrong. I believe it makes no sense to stop buying and cash in when you are still getting 10 to 15% annual appreciation on your property.”