7 Valid Reasons for Selling Your Investment Property
PUBLISHED 19 APR 2018
7 Valid Reasons For Selling Your Investment Property
A decision to sell a long term asset such as a property can sometimes be
a challenging decision for an investor,more so if you’re a novice
“Every property investor will be confronted with this question at some
point in their investment journey. Therefore, knowing when to sell or
hold your investment property is essential when building a portfolio,”
says Praven Subbramoney, CEO of Private Bank Lending at FNB.
Due to the long-term nature of the property investment journey, the
general rule is that property should at least be held for five to ten
years to allow you enough time to study market conditions and further
assess the viability of your property portfolio.
Subbramoney unpacks some of the reasons why investors end up selling their properties:
- Exit strategy – some investors venture into property having already
developed an exit plan, which consists of selling the properties and
using the funds for alternative business interests.
- Recycling equity – this involves selling a property and using the
equity to buy a better performing one. When going for this strategy, it
is essential to take into account the costs involved in selling and
acquiring a new property and whether the returns will be better in the
- Poor performance – if a property fails to provide good rental yield
and capital returns for at least five to 10 years, it may be considered
to be performing poorly and eventually sold.
- Diversification – property investors may sell some of their
properties to unlock capital and diversify their financial risk into
another asset class, such as listed equities.
- Deteriorating neighbourhood – selling property due to unfavourable
changes in the neighbourhood is common for inexperienced investors who
did not conduct proper research when acquiring the property. This could
also have been the investor’s former place of residence, which they
decided to rent out after moving out.
- Life changing events – major life changing events like getting
married or having children may lead investors to sell their properties
and seek a new direction in life.
- Market timing – new investors who do not adequately understand how
the property cycle works may be tempted to sell when market conditions
There are many circumstances and underlying factors that may lead you
to consider selling or holding your investment property. The decision
should ultimately be based on your current circumstances, investment
strategy and what you aim to achieve.This article was originally published on Home Times.