To sell or to buy. What strategy to use?

Do you expect your house to drop in value? Bear in mind the high costs of entry and exit probably about 10%. What will you do if prices don’t fall?

Hi JC,
A good reply there from CRJ – but lets visit their warning :-
“Bear in mind the high costs of entry and exit probably about 10%”

Going by your words, I “think” the property you are talking of selling is your own PPOR – is that right? If so, then one of the common costs (CGT) of selling has gone away. But yes, there are still several other costs to consider when buying/selling.

My income is relatively low (60k) so the temptation is there to sell up in the next 6-12 months or alternatively purchase my first IP.

Another option would be (subject to serviceability) to borrow against the Equity to provide a deposit for IP#1. Do talk with one of the Finance Advisers re your possibilities (you may be surprised at how many options you might already have). Of course, any final decision should be taking you closer to your goals, not further away.

Re Gold Coast, I have the impression that GC prices (like Brisbane’s) have been suppressed for some years. With Brisbane now moving, it is likely the GC will be moving already, or might be ready to start moving. We had our dip following GFC – now, 6 years later, I’d think a gentle increase is on the cards. But note, I don’t “follow” the Gold Coast in any depth – so that’s really just another opinion…..

If I use the strategy of selling soon and then looking to buy again when/if prices fall, due to the market cycle, am I losing valuable time in the market.

I was just reading one of Jason’s recent Articles – and one of the points made therein was on that very subject !! Go here to take a look:-
https://www.propertyinvesting.com/the-7-most-fatal-property-investing-mistakes/ Now scroll to subject “#5 – Buying at the Wrong Time”. Have a think around that, as it also has a bearing on “Selling at the wrong time”.

In short, know WHY you are wanting to sell before actually selling. Know just how the figures will work, the advantages selling will provide you, and the disadvantages too – BEFORE you sell. Having a chat with one of our members who is an adviser on money matters would be a good idea too. Use the knowledge of someone else who knows things you need to know – and maybe make them part of your “team”.

Benny

Without generalising too much (although this is general advice only) the majority of property investors buy and hold with the exception of the renovate to sell crowd. I have no idea of percentages but this is generally what I come across.

The first thing you need to think about is what your goals are and what you hope to achieve by selling. You’ve already said that you want to take action in the next 6-12 months. This being the case do you simply want to upgrade your PPOR, buy a PPOR which you can then renovate to artificially increase the equity or would you prefer to stay in your current residence and buy an investment property. If you are seeking to upgrade your PPOR or want to renovate a new place have you considered converting your current PPOR into an investment property and buying a new PPOR? This is a very common strategy. If as you say you bought below market value and you have performed some cosmetic renos then it is entirely possible there is equity available for you to use as a deposit for your new PPOR.

If you decide selling is the best option for you right now then the entry and exit costs are the biggest concerns at this point. Real estate agents selling fees and stamp duty on your purchase are the biggest killers as CGT isn’t an issue for you. Is this outlay going to be offset by the gain you expect in the near term from purchasing the new property?

Of primary importance is where you think the market is going to go and how this sits with your goals and preferred investment strategy. Sure the risk of the market falling is very real, however will this fall by 5%, 10% or 20%? Given that exit and entry costs could be upwards of $30k for a $300k property (guessing as I don’t know the specifics) do you expect the market swing to be greater than this? You also have to factor in the hassle of selling and buying and the risk of storing cash in an account somewhere waiting for the “right” time to enter the market.

Something to consider when thinking about your goals and intended investment strategy is that for a buy and hold strategy, the entry point is very important, but more so is the exit point, i.e. for a true buy and hold there is no exit point. This would mean the down swings in the market “don’t” affect you as you just sit back and wait for the upswing OR (and this is the ideal) this is when you buy your next investment property. So timing the market will be less critical than if your strategy is strictly buy, improve and sell which will then be severely hampered if the market takes a dive.

• This reply was modified 9 years, 8 months ago by  Tom@SadhanaConstructions.

Consider a mortgage broker. A mortgage broker is there to help you find the right home loan for your situation. Since this is your first home loan, a mortage broker can show you the ropes and explain all the features available.