Should I Sell My Investment Property?

November 6, 2020


New Zealand’s real estate market is running red hot with our borders closed, no overseas holidays, and kiwis returning home in droves due to COVID-19. It begs the question — is this the time to sell your Christchurch investment property?

Let’s dive into the arguments for and against selling your rental property during a real estate boom.


The Christchurch real estate situation right now

Taking a short-sighted look at the surface, yes — now does seem like a profitable time to sell your Christchurch rental property. Real estate sales in the garden city are currently very active for properties priced up to the 800k mark.

Banks are offering interest rates as low as under the 2% mark and more New Zealanders are returning to Aotearoa and purchasing homes (32,000 people arrived home between 26 March and 31 August), which means more buyers in the market.

Median prices in Christchurch are at record levels, rising 11% YoY in September, up to $495,000.


Reasons you may want to sell your rental property

You may be considering selling your investment property because your personal income has decreased, and you need to restructure your debt, lower your total repayments, or both.

It could be that the equity in your rental property has grown to the point that you can sell one property to buy two properties in a high-growth location, or to pay off your own home and still have enough profit to buy a new investment (property or otherwise).


What will you do with the cash if you do sell your investment property?

Deciding what you would do with any revenue from the sale of your rental property is important. Look at your options and any related upkeep required - will the money invested in your rental property serve you any better in shares or stocks or a business venture?

How much time/effort/money will it take to manage the cash if invested elsewhere, and what will the yield be? How will the return compare, and will it be as passive as that experienced with rental property?


Consider the typical yields from Christchurch rental property

When comparing the yield from other investment avenues, consider the typical yields from your rental property. Christchurch rental property yields are some of the best in New Zealand right now. For the three months ending June 2020, REINZ figures showed Canterbury held the fifth highest yield rank in the country with a median weekly rental price of $400 and a yield of 4.5%.


Is owning a rental property worth it with increasing compliance responsibilities?

Some landlords are likely concerned there is too much being asked of them with the Residential Tenancies Amendment Bill coming into effect and the encroaching Healthy Homes Standards deadlines.

Making changes to your rental property to meet Healthy Homes Standards compliance is a one-time investment and will improve the standard of living at your property, likely reducing tenant turn-over and costing you less in the long run.

Once these changes are made investment property owners can look forward to future investment to bring the standard of their offering up, and in turn increase the weekly rent they can rightfully ask for it.


Looking at the long-term strategy — passive income and capital gains

Owning an investment property isn’t a game of quick wins — residential rental property is a long-term investment designed to provide you with a passive income during your retirement.

You’ll likely retain more control over your destiny with your investment property than with funds tied up in financial markets.

Capital gains continue to build through thick and thin, so when it does come time to part with your rental property for whatever reason, you’ll still receive a capital gain regardless of how long you wait. Some owners get itchy feet during real estate booms, become impatient and go for the quick win over the long-term strategy to achieve financial security later in life.


If selling is still the best option for your situation…

If you’ve weighed up the pros and cons and you’re convinced now is the best time for you to sell your investment property, make sure you engage a real estate salesperson who knows how to sell a tenanted property. It is an acquired skill to get the best possible result for the seller while retaining any good tenants currently in the home.

A good tenant willing to stay on through the change of ownership can be a great selling point for another investor looking to purchase the property from you.


Skin in the game and knowledge from all camps

With both property managers and real estate salespeople in our team, we have skin in the game across both sides of this argument, so we understand this difficult decision and all the factors that go into it.

If you’re on the fence, please don’t hesitate to get in touch and discuss your situation. We’ll help shed light on your options and can support you in your decision making, whichever path you take.


Image by Suzy Hazelwood from Pexels.

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Filed under Landlord Information \ Real Estate \ Real Estate Investment

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