Selling and Exit Options

When to sell your properties

Please go back and read the exit strategies section in Step 3, because this discussion is separate to that - you should sell your properties in accordance with your exit strategy if you have reached your financial goal.

However, there is also a discussion to have about whether you should sell properties because they have already grown a significant amount and therefore it may make more sense to sell that property because the data would suggest that it cannot keep performing at the rate it is (take your mind back to the data metrics we looked at in Step 4 regarding historical growth rates).

There are various different views on this, mine is that the cost of selling properties in Australia is too expensive to continue trading in and out of properties. However, if your property has already more than doubled (or thereabouts) in a short period since you have held it (i.e. 2 - 5 years) and your mortgage broker has said you can't borrow anymore money unless you sell that property - then you could sell a property to get yourself into a market that is about to perform well.

But I would only do so as a last resort and if the market that the property is located in is showing signings of weakening demand and supply. It will be impossible to time the top of the market, and you shouldn't try do this, it is generally better to sell while a market still has some steam / heat instead of waiting too long and get stuck trying to sell in a buyer-friendly market.

For reference, some signs of a market slowing down are as follows:

• Stock on market consistently increasing

• Days on market consistently increasing

• Vendor discounting consistently increasing

• Clearance rates consistently decreasing

Please don't misinterpret this section as me saying as soon as it looks like a market is dipping you should sell out of it - if you invest in economically diverse locations with strong fundamentals you shouldn't be trading in and out of property. I have dealt with this prior in this website, but for you to really experience the benefits of compound growth you need to hold a property for multiple cycles.

This section is just for those who have 'hit a wall' and need to take one step backwards to take two steps forward - i.e. selling a property which has performed extremely well in order to move your money into more promising markets.

I haven't touched on this much as I assume you have purchased a property using data so ideally this wouldn’t have occurred - but alternatively, if your property is not performing at all over the past couple years of owning the property and the data is not improving (i.e. you have purchased a dud), then you may also want to consider cutting your losses and putting your money elsewhere into a more promising market - especially if it is preventing you from borrowing more from the bank.

Here are a few videos which could be useful to give you some more information.