Should You Sell Your Investment Property? (3 Main Considerations)

[@petercoburn2362]

My wife and I jointly owned an IP outside of superannuation for 20 years which was negatively geared for 10 years. We had a nightmarish experience with a bad tenant who had more rights than us. As soon as we retired we sold the property to minimize our CGT exposure. Our nett return after all expenses, including growth, was around 5% pa. In hindsight we should have invested in shares as the stress on us when we had a bad tenant severely impacted our health. At least shares can be sold and the funds available in 3 days, however, in our case, it took nearly 12 months to get our bad tenant out and the property sold. Step carefully if you planning on buying an IP.

[@jdxx59]

We had an identical experience as you. Tenant from hell. No wonder people find it difficult to find rental properties. I would NEVER have another one and would never recommend to anyone to have one either.

[@TheGladeGirl]

We had the same experience with 3 properties - the tenants caused so much damage and our stress is/was horrible - 2 houses sold and we are about to put the last one up for sale. Also the ‘Property Manager’ was indifferent!

[@lbarbato6425]

I had 2 investment properties back in the 90s. Bought in the low sold in the high, after taking all into account. Interest rate if I left the deposits in the bank, costs to hold the 2 properties, cost to do them up after tenants moved out / damaged them, agents fee to sell and I even sold 1 property myself. The estimated return after selling was not worth the headaches vs leaving my money in the bank. Super is the better way to go if you are close to retirement or leaving money invested in your super company when retired.

[@MrBede80]

I’m pretty sure in Australia we still pay tax on the amount of time you used the residence for investment purposes.

[@Craig.64]

We bought an IP down NSW snow fields in 2010 when prices where affordable (we have no debt). It's worth at least 3.5 times our purchase price and returns us around $25-30k pa for Holiday rentals (only 3 months a year plus we use it for out snow trips). There is a slight bit of maintenance involved in order to keep it at 4 star rating and we travel down around 6 times a year (having holiday stays and doing any jobs whilst there). Best investment we ever made as we love the Alpine. I am now 60 and have retired with us having a substantial super balance to live very comfortably. We would never sell our IP and will pass it down to our kids when we're gone.

[@chrisj6321]

this is an interesting topic that i will have to consider. One of my ideas to get rid of the CGT issue is to sell my prime residence then use the downsizer contribution and move into my investment property.

[@SuperGuyAu]

I believe the eventual sale of your investment property may still be subject to CGT for the period it was owned as an investment property. You should discuss with your accountant.

[@chrisj6321]

@@SuperGuyAu yes i presume it would but i dont plan on selling that

[@eddiecoyle5019]

​@@chrisj6321 ❤❤

[@aussietaipan8700]

We purchased a holiday home 24 years ago and the intension has always been to be a summer home (close to the beach) and eventually my kids will have it when I pass away. We rent it out for short term stays and special events (that we are not interested in) so selling it is not on my radar as it is also a way of life for our family. We own it and our livin home outright. 754 liked

[@SuperGuyAu]

That's right - everyone has their own unique objectives.

[@DM-yf7fn]

Excellent video Chris - presented the salient facts very clearly.

[@SuperGuyAu]

Thanks! Glad you liked it!

[@lucytrust4157]

Would a reverse mortgage be another option? You can get the cash and get tenant to pay the interest?

[@robdonaldson4837]

G’day Chris, good general info, however I disagree with your calculation of Gross Yield in the example. I think you should have used $500,000 not $800,000 as the denominator, as this would be Mark and Lauren’s real current return on their 5-year old investment property. The $800,000 denominator would only apply to someone buying the property now. Their current yield on their $500,000 investment would therefore be 5.72% for comparison purposes, not 3.57%. Nett yield would be 4.12% (or 2.88% after tax) for comparison purposes with a current term deposit bank return. Just my thoughts on which figures to actually be comparing. Otherwise, great general discussion and certainly is food for thought in my retirement planning efforts. Thanks.

[@jillianmunday7640]

Interesting point.

[@SuperGuyAu]

To compare like-for-like I believe the logical approach is to compare alternatives at any given time. Therefore it must be based on current value. For example, what if this property was purchased at $100k and now $800k. If it was only earning 0.5% on the $800k (which is 4% on $100k) it wouldn't be wise to retain it if you could (for example) get a return of 6% on the $800k elsewhere. You're essentially accepting a lower return for an arbitrary purchase price. What if the property was gifted to you for free from a relative and only earning a yield of 0.2% - then what would you do?

[@alecbrimacombe4830]

Very informative video Chris. Lots to be aware of regarding IP, CGT and Super.

[@SuperGuyAu]

Glad it was helpful!

[@billyoung4982]

Don't forget you can contribute to super and claim that against your cgt if you are retired as long as it's the same year you signed the sales contract bad advice from my super guy missed by 3 days and it cost me thousands good work on the video

[@SuperGuyAu]

Yes, you are correct Bill. As mentioned in the video, deductible contributions to super can offset CGT. Sorry to hear you missed it. If you're ever considering advice from a different adviser, check us out here 😉www.torowealth.com.au/

[@adorolivar1340]

You can offset your cgt even if NOT retired through your personal super contributions

[@steverau-f8s]

Excellent video Chris...packed with fantastic information to help me move forward with my retirement planning/strategy based on the fact that my wife is about to reach her retirement age of 67 and I (being a few years younger) found myself without a job earlier in the year due to the company having to liquidate. Lost of food for thought!! Bless ya heaps!

[@Namlange70]

Fantastic information Chris. Thank you

[@SuperGuyAu]

You're welcome! Glad you got something out of it. More to come...be sure to subscribe!

[@SuperGuyAu]

Hey everyone, thanks for watching! Ready to take control of your retirement? Download our FREE 6-Step Superannuation Check today: www.superguy.com.au/super-tips/

[@th29inchbgyellowtaxi]

Another very helpful video. Thank you!

[@kumonburwoodeducationcentr5783]

this is super helpful, thank you very much, I need to watch it a few times to be able to learn the various factors

[@SuperGuyAu]

You're welcome. Thanks for watching!

[@jillianmunday7640]

Hmm, complex. Much food for thought. Thank you.

[@SuperGuyAu]

No problem.

[@deemad2180]

Risk free at the moment is 5.4% with AMP.

[@Woodland26]

I would definitely only consider selling after full retirement, therefore have the maximum tax benefit. Also my IP was bought over 30 years ago and now it is returning 10% on the original purchase price. The loan is paid off long ago. 2 blocks away the Sydney Metro West is under construction. I hope one day some developer will make a nice offer to building higher density housing.

[@SuperGuyAu]

Nice, well done! Personally, I think calculating the yield on the current value is more relevant than the original purchase price, so that you can accurately assess risk/return compared to alterative investment options.

[@Woodland26]

@@SuperGuyAu very true, shall continue to reassess the return Vs alternative choice.

[@Tiger_Of_Old]

@@SuperGuyAu In the video you use the gross value of the property when calculating net yield. I think it would be more accurate to use the net value of the property (ie sale price - conveyancing/marketing/repairs and staging/agent fees/lender fees and CGT). That is the true value left to put into a different investment, your thoughts?

[@SuperGuyAu]

@@Tiger_Of_Old Good point. Yes, you could take that into account. My thoughts are that those costs are probably going to be around $10-$20k and the sale price of the property is likely to vary by that amount on any given day, so I guess this is really just a simple approach to comparing options.

[@gm.Observer]

Thank you for all the information. One thing I have learned is that super is confusing and that I will need the help of a professional.

[@TheGladeGirl]

If your SMSF is in ‘pension mode’ you don’t pay CGT on the sale of an asset.

[@livefreeordie-gv6kx]

Im 63 and wife is 61. Bought a block of land 50k in 2000. Now worth 600k on a good day. Bth retired living on rent from two investment properties and savings.Bth supers still in accumulation phase. Can I avoid paying capital gains on the sale of the land by using the 3x 120K non concessional contribution into super?

[@markuss3886]

Hi Super guy, I have a commercial property with a net yield of 72 K and its worth about 1.8 million in or super .Should I sell it once retired ? and roll it over into a superfund for a better return .

[@cv6811]

Hi there, I know this video is an old one but still relevant I believe. I'm receiving a yield of about 10% on my investment property. This gives me a return of $38,000/ year. I feel that this gives me an extra income during my retirement years for a while. If for some unknown reason I require extra funds, I could always sell my principle house of residence tax free and top up my superannuation by $330,000. I can then move into the rental property after valuating it on the day I move into it. What are the ramifications of doing this. 🤔

[@SuperGuyAu]

The ramifications will depend on your circumstances at the time. I would suggest seeking personal advice if/when you plan on doing this.

[@giovannamorales3771]

At current you could get 300k in super plus pension as single 44k tax free. No headaches.

[@lasserbream]

What happens if you move in to your investment property and lived in it for 2 yrs before selling it, would that make any differences?

[@SuperGuyAu]

Depends on what you mean by differences. The purpose of this video is to explain some of the things to consider if you were looking to sell your investment property. I'm not sure I understand what you are referring to.

[@lasserbream]

@@SuperGuyAu Like me, I own an investment property for over 5yrs, if I sell it I get slog with capital gains tax between 20% to 30%, but if I moved into my investment property and reside there for at least 3yrs would that reduce my capital gains tax for that property?

[@chrisj6321]

​@lasserbream no it wouldn't but u would get it valued when u move in to it and any future growth would not be up for cgt if u continue to live in it.

[@groooobytooby1306]

I don’t understand why you have to sell property for liquidity? There are other ways of getting access to money tied up in your property.

[@fredfred4086]

Financial advisors want you to buy products through them so they can get large commissions.

[@jeanvonbarberode2377]

My idea is as I am an European, I will sell my IP in Australia and in the same year I will relocate myself back to EU and work there for the half year, then come back to Australia, so my CGT will be minimal. Also I saw cases where people built a second home and sold it within 6 months , this is treated by ATO as 2 Places of permanent residency, however you need to dispose one property within 6 months otherwise you are eligible for CGT.

[@eddiecoyle5019]

Love you chris

[@SuperGuyAu]

Thanks Eddie!

[@justgjt]

Do you work with clients remotely or do they have to sit in front of you ?

[@SuperGuyAu]

We work with clients remotely. This video explains everything you need to know superguy.com.au/advice-process

[@waynev5097]

Great explanation and provides good basis for thought But..... Isn't owning the house providing diversity for their retirement portfolio? - They have less than 50% in property. They could possibly tolerate a higher risk in their super to balance the portion in property. CGT certainly can eat into your return -, particularly in those areas where there has been long term high growth. Owners can find themselves paying 22% tax on their growth compared no tax if the capital were in super. Each property is different and each person's individual circumstances are different - and your method of analysis would help a lot when considering options. Thanks

[@SuperGuyAu]

Yes, an investment property could provide diversification. However, an investment property could be owned within super also. Like you said, everyone's circumstance and investment preferences vary.

[@waynev5097]

Good point - Buying investment property wasn't an option when I bought mine - that is my excuse😢. Is there any way of shifting it into super - at least if only that the future capital growth can be assessed within super?

[@chrismann9411]

Are you considering doing a video like this one but "Should I sell my share portfolio"?

[@SuperGuyAu]

I'll add it to the list!

[@chrismann9411]

@@SuperGuyAu thanks

[@michaelhermans4753]

I built granny flats on my investment properties so the yield is now 10% guaranteed The rent goes up with inflation I find that hard to beat Investment advisors never promote real estate as their focus is commissions on investment funds, a bricklayer can be a financial advisor by doing a 6 wk course😮

[@fredfred4086]

Correct, every financial advisor advises you to invest in products that they can sell to you and earn sales commissions and trailing, annual commissions. They only present the problems with other investments, and the benefits of shares. A share market crash will most likely be far larger than a property market crash.

[@geoffhowellsmusic]

Expenses of 8K? What about the interest on the loan they needed to buy it? That would have to be over 20K if they are ordinary mum and dad investors.

[@NigelSlade]

You mentioned not putting all your eggs in one basket. Isn't selling an investment property and adding it to your super doing exactly that?

[@SuperGuyAu]

A common misconception is that superannuation is an investment. But, super is actually just a tax structure. Within super you can invest into any asset/s you like, subject to the the investment menu of your super fund. You can invest your super into 1 investment, 100 or 1000, including property, shares, managed funds, term deposits, etc. - thereby providing diversification. Even a basic pre-mix investment option (e.g. Balanced option) in a standard super fund will often have hundreds of underlying assets for diversification.

[@timbo7676]

If the Investment Property is fully paid off, can the taxable rental income be used to make super concessional contributions and thus lower your taxable income even if you've reached retirement age and still make a tax-free draw off your super?

[@SuperGuyAu]

Generally yes, but between aged 67-75 you need to meet the work test. Discuss with your accountant.

[@Bluetooth_ez]

The government wants to make it as difficult as possible for you to benefit from investing. CGT is avoidable completely on an investment property. CGT is just another tax the government uses to limit your ability to gain wealth.

[@deemad2180]

Also CG is on average 9%

[@markormiston1636]

Hi super Guy iam 60 can I retire

[@SuperGuyAu]

Hi Mark, there is no restriction on what age you can retire in Australia. Anyone can retire at any age. If you would like to know whether you can access your super, then yes, you generally have at least partial access to your super at age 60. You may even have full access depending on your employment status. If you would like us to assist with a retirement plan, please get in touch here www.torowealth.com.au/

[@josephhackenberg8136]

I don't understand why you are using the current value as a substitute for the actual debt. Not realistic for their situation.

[@akasug4136]

Yeah, sell it to a first home buyer and buy Bitcoin.

[@T4G95]

Or buy dividend paying shares and set yourself up to live without needing a government pension. Bitcoin can be way too risky for some peoples situation.

[@posspet]

What happened to Jane? Is she the divorce option.?

[@CallsignEskimo-l3o]

Why would you assume a tax rate of 30% rather than one of 15%?

[@SuperGuyAu]

The 30% rate is used because in the example given, the people are working full-time and have rental income, so I have assumed the rent will be taxed at around 30% based on marginal tax rates www.ato.gov.au/Rates/Individual-income-tax-rates/

[@richardspinks6736]

No way a 800k house rents for that little ! Be easy 700-800 PW so that throws your numbers out a bit. But great info never the less

[@helenegan1079]

800k house is certainly not in a desirable rental location. Where prices on average are over 1-3+ million. This is what you pay for a small ff 1 bedroom appartment in the city in Melbourne. Everything to do with location not the property itself. No shortage of transient tennants.

[@graham2954]

Yes, you should get rid of your investment property so young families can buy a home.

[@rqn1998]

LOL

[@chrislangley4029]

I’d sell that rent property in a heartbeat. That’s no cash flow. You should be getting 1% of the property value in rent per month or very close. Your money is better off in the market by far