Is your lease term nearly up? Wondering if now is the right time to sell your investment property? Here are a few questions you can ask yourself, helping you understand whether the time is right.
What am I currently getting in return?
Yield is your annual rent divided by the purchase price of your property. It tells you how much cash your rental property produces each year as a percentage of it’s value.
Example: Calculating your rental yield
- Your property was purchased for $380,000
- It rents for $400 a week * 52 weeks per year = $20,800
- Total rental costs are $5,000 (e.g. rates, property management fees, insurance etc)
Gross yield is $20,800 / $380,000, or 5.5%.
Net yield is ($20,800 – $5,000) / $380,000, or 4.2%.
3 simple ways to increase your rental yield:
- Installing or updating amenities such as a dishwasher, heating and cooling.
- Adding extra storage space
- Including a car park
You can get an updated rental assessment at any time to make sure you’re charging enough rent. You can do this through your property manager.
If you’d like to find a new property manager for your investment property, you can compare property management fees and services at LocalAgentFinder.com.au.
Is the value of my investment property increasing?
Capital growth is your property price increase divided by the purchase price. To estimate your property’s capital growth, a local real estate agent can give you a property appraisal.
Example: Calculating an estimate of your property’s capital growth
- Your bought your property for $380,000 in 2011
- Your property is valued at $520,000 in 2018
Capital growth is ($520,000 – $380,000) / $380,000. This is 37%, or 5.3% per year. However, you’ll need to take the costs of buying, selling and inflation into account too.
Remember, this is an estimate. Your property is worth what someone is willing to pay for it.
If you’d like to get an estimate of the value of your property, you can compare real estate agents at LocalAgentFinder.com.au, including sales history, marketing fees, commissions and homeowner reviews.
When did I buy my investment property?
If you bought your property under five years ago, you may want to consider holding it as you’ll want to cover the expenses of purchasing it. (For example, stamp duty, conveyancing etc). Property is more often than not a long-term gain. But that said, depending on market conditions, it could be worth getting a property valuation or appraisal to see if your investment property value has increased enough to cover the costs and make a profit.
Is the market right to sell?
The best time to put your property on the market is when you’re in a seller’s or ‘hot’ market. If the market is warming up, it could be a great time to consider selling your property. You can read more about seller’s and buyer’s markets here.
When to sell my investment property – what’s next?
If you’re unsure whether to sell or not, the best place to start is finding a great real estate agent who has deep knowledge of the local market. They can help you decide on whether now is the right time to sell your investment property. You can compare agents at LocalAgentFinder.com.au, including sales history, commissions, marketing fees, homeowner reviews and more.