Sell or hold?
Question from Mal updated on 31st October 2018:
We have a freehold home and two rentals that owe: $176,000, $211,000 and $316,000. Obviously, we are topping up two of the properties. If we sell the first property for $600,000 to reduce debt we could pay off the last $103,000 in a few years. Is this a better option than paying off $703, 000 over 20 years? Or is having three rentals better than having two?
Our expert Matthew Gilligan responded:
Unfortunately, I cannot help you much here. There is simply not enough information for me to be able to give any sort of reasonable answer. Essentially, you are asking for review on whether you are best off to keep the capital that you currently have invested in the home and three rentals as is, or whether you are best off realising some of that capital and using it to reduce debt.
If the three rental properties all have good prospects in terms of capital gains and reasonable yields, then it might be appropriate to hold onto them. If they are poor performers, it might be appropriate to sell all of them. Your personal circumstances also feed into this equation, in that if you are a late-stage property investor, you are more likely to be looking to de-leverage, as opposed to somebody starting out with a long investment timeline and an expectation of continuing to earn income outside of the rental activity for a long period of time.
Unfortunately, I cannot offer any more than that.
Matthew heads GRA's specialist property and asset planning division. He helps clients create optimal tax structures and build wealth through property. He has an extensive buy-to-hold property portfolio, is currently involved in over a dozen developments, and is author of two books - Property 101 and Tax Structures 101.Search the Ask an Expert archive
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