To sell or not to sell?
Question from D updated on 18th October 2013:
I bought a multiple income rental property in 2004 for $210,000. I've spent a bit on it over time. Currently it's rented for $560 per week and is cashflow positive. I have had an unsolicited expression of interest to purchase the property. I have no idea where to start. The property currently has a gross yield of over 14% and other than repaying debt, I'm not sure I want to sell. Any thoughts?
Our expert Kris Pedersen responded:
You need to think about the "opportunity cost" factor. If you can reallocate the capital somewhere else where it can provide a better return for you then this may be an option to sell. If not then you are probably best to hold onto the property. From the information provided repaying a mortgage doesn't sound like the best idea as I am guessing that 14% gross should translate into a net return higher than what your mortgage requirements are, meaning that you are probably best to hold off.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz
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