Selling investment property | %%sitename%%

Should you sell your investment property?

Author’s note: This article on selling investment property is by far our most popular – probably because it’s comprehensive and comes complete with formulae – but at over 5,000 words it’s longer than an average book chapter. So, here’s the summary of what you’ll find in this article so you can decide if it’s what you’re after:

  • Five sensible reasons to sell (to reduce interest on your home; poor performance; better asset available; it was once your home; losing sleep over it).
  • Five reasons that it may be better to hold (it’s a recent purchase; solid performance; high potential for growth; it’s key in your strategy; no mortgage on your home).
  • Full worked calculations based on the scenario of having a home mortgage and an investment property (three worked options: keep both; sell investment and swing profits to home mortgage; sell investment and use profits to buy another property).

At the end of the article, you’ll find instructions for obtaining an Excel spreadsheet that does all the calculations covered in the article and lets you run scenarios for your personal situation.


Recently, I was asked on two occasions in a single day for my thoughts on whether or not my friends should sell their respective investment properties. When I mentioned being asked the same question twice that day at dinner in the evening, a third friend said ‘Yeah, I’ve been wanting to ask you the same question about my property.’ I’ve been pondering why so many people were thinking about selling their investment properties around then.

It was Christmastime, so I can only suppose it’s because it’s that time of year when we take stock of our lives. We consider what’s been good, what we’d like to change, and what the next year might have in store for us. Some people make travel plans, others pin their resolutions to the fridge. It’s also a fitting time to do a quick check of your financial position and ask yourself a few pointed questions. Whether or not your current investment mix is ideal for you, right now, is a good question to ask. Because of the nature of property – being a large financial commitment requiring cash flow to service it in many cases – it makes sense to start there when you’re assessing potential changes to your portfolio.

It’s something I have been considering myself of late. In fact, my husband and I did sell one of our investment properties recently.

Having attempted to answer this question for three different scenarios, I’ve outlined the main themes behind my reasoning below. If you are taking stock of your financial landscape and considering selling an investment property, I hope you’ll find them useful. I’ve included an example with all my calculations that you are welcome to replicate for yourself. If you’d like a copy of the spreadsheets I use to do the calculations, please grab it here.

Good Reasons to Sell

There are several excellent reasons selling might be a good move. Here are five to consider:

1. To reduce interest paid on your home

Your home (or principal place of residence, PPoR) is considered an asset by the bank. It’s often the biggest asset a person owns. But it’s not really an investment. You don’t earn an income from it, you don’t get any tax benefits from it, and you can only get the benefit of any capital increases from selling it. That is, assuming you’re not securing loans for other investments against your home. You’re not crazy so that’s a pretty safe assumption.

If you’re like most Australians, you took a mortgage to buy your home. This means you’re paying interest. For a typical loan over 30 years, you’ll pay back double the amount you borrowed. If you borrowed $300K and pay back the minimum repayments, you’ll give the bank more than $600K before you’re debt free. You’ll be paying with after-tax dollars too, so if your overall tax rate is 30% you have to earn $857K to pay back the original $300K. Sure you’ll earn it over 30 years, but it’s still a hefty sum. Anything you can do to reduce it will be worthwhile.

Selling investment property | %%sitename%%

If only a drawing of your home would do the trick… much cheaper than the real thing!

I’ve heard people say they don’t pay down their PPoR mortgage because they can ‘do better’ with the money, meaning they can beat the cost of paying the interest. That’s a big claim. A reasonable interest rate to expect over the life of a loan would be in the order of 7%. In the late ‘80s, people were paying 18% interest – more than treble current rates. On top of the interest, you’re paying with after-tax dollars, so you’re probably closer to 10% including that. If you can guarantee a 10% return on your money every year for 30 years, you’re eclipsing 99.99% of investors – including the professionals. Bold claim, but if it’s true – please tell me your strategy!

2. The property is underperforming

Real estate can tie up significant capital and equity. Most people will lay down a 20% deposit to avoid insurance, so a $500K property will tie up $100K on settlement just for the deposit – not to mention all the other fees you have to pay up front when you buy a property and then maintain its ongoing costs. For that kind of cash, you want to be absolutely sure you’re getting the kinds of returns you expect. So how do you assess whether your property is performing to your expectations?

There are two common performance measures with any investment:

  1. Yield – the cash flow you are getting from it. For an investment property, that’s rent.
  2. Capital growth – how much the investment is increasing in value. For this instance, that’s related to how much you can sell your investment property for.

How do you calculate each, and what does ‘good’ look like?

Selling investment property | %%sitename%%

If your calculations look this complex, you’re doing something wrong

Yield is your annual rent divided by the purchase price. The purchase price is obviously fixed, but you can calculate gross yield by using the rent only, or net yield by subtracting costs. For example:

  • Property X 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, agent’s 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%.

As a rule of thumb, I expect around $100 a week rent for every $100K of property value. For example, for a $400K investment property I would want $400 a week rent before expenses. I have found this holds true in Brisbane since I’ve been investing. In the mid 2000’s in Perth, I saw around $70 a week rent for every $100K of property value, but that has now caught up to Brisbane’s level. I can’t vouch for the other capital cities or regional areas.

As for capital growth, the simplest indicator of progress is what the likely sale price would be if you sold your investment property today minus the price you paid when you bought it. You can get estimates of current value from RP Data or Price Finder, or your bank may be able to provide a valuation. You can always pay for a valuation if you really want a more accurate number. Real estate agents will provide recommended listing prices for free too but be warned: they’re relentless. Once you open the lines of communication, expect them to approach you about selling regularly. They may also provide an inflated estimate to get you excited enough to list with them.

With any price estimates, remember they’re only guesses. A property is worth what someone is willing to pay for it. Until that person signs an offer, you can’t bank the value. It’s a guide only.

To calculate capital growth, divide the price increase over the purchase price. For example:

  • Property Y was bought for $380,000 in 2006
  • It was sold for $520,000 in 2013

Capital growth is ($520,000 – $380,000) / $380,000. This is 37%, or 5.3% per year.

This gross profit measure is indicative only. Because of the costs of buying and selling and thanks to inflation, you will not make this much money when you sell.

And what does good growth look like? Historically, house prices increase by 7% a year in Australia. This is an average, so some years are higher and some much lower, and we have experienced negative growth in some years (i.e. loss). Because an investment property is a long-term game, it’s not helpful to look at growth within 5 years of purchase – unless you really want or need to sell.

In the case of investment property, there’s a third measure of sorts and that’s gearing – as in positive, negative or neutrally geared. What does this mean? In order of desirability:

Positively geared is when your costs are less than the income on the property. In other words, the investment property makes money and you don’t have to shell out anything to maintain it (excepting those hopefully rare periods of major maintenance or vacancy).

Neutrally geared is when your costs are roughly equivalent to your income on the property. You may not have to fork out any dosh, but you’re not making an income from it either.

Negatively geared is when your costs are greater than your income on the property. You have to contribute cash over and above the rent to make the books balance.

Why on earth would anyone want a negatively geared property? Because you can reduce your costs by declaring the loss on the property in your income tax – this effectively means the government subsidizes part of your property cost. It’s a common strategy if you pay a lot of tax, and it can be useful if there is opportunity to secure a property with high potential capital growth.

However, the bottom line on negative gearing is: it’s costing you money. When the proverbial hits the fan, it’s a pressure you may not want or need.

3. You have a better option

Let’s say you have the inside line on a fabulous investment opportunity – real estate or otherwise. You have as-close-as-you-can-get to a guarantee that your returns will be better than your current investment property, taking into account change-over costs. It may then be worth cashing in your chips and changing your strategy.

One example where this might have been appealing is the recent government initiative: the National Rental Affordability Scheme (NRAS). Because of the incentive of nearly $100K cash back from the government for buying and renting out an NRAS qualified investment property, this might represent an improvement on your current property. That is, if the NRAS property is not overpriced…

Selling investment property | %%sitename%%

Got the inside line on a great investment? Perhaps that’s a better place for your dosh

4. It used to be your PPoR

There is a tax benefit to selling an investment property if:

  • You lived it in immediately after you bought it, and
  • You moved out of it within the last six years.

The benefit is you will not pay any capital gains tax (CGT) on the sale if you make a profit. Timing is everything…

5. You’re losing sleep over it

Is your investment property keeping you awake at night? Are you worried about the impending bathroom replacement you know is coming because you found a leak on the outer wall last inspection? Are you struggling to get reasonable and consistent tenants? Are you fretting about how you’ll make your repayments with a potential redundancy on the horizon?

If you’re losing sleep, lose the property. In my opinion, it’s not worth losing quality of life over. Cut your losses and find something that doesn’t cause you distress to invest in instead.

Good reasons to hold

Sometimes selling isn’t such a great idea. Here are five reasons you might prefer to hold onto your investment property:

1. You bought recently, i.e. less than 5 years ago

Because of the costs to buy (stamp duty, conveyancing) and to sell (agent’s fee, conveyancing again) getting in and out of property can quickly become an expensive exercise. Our recent sale went from a $28K profit to a $15K loss due to these expenses alone. This is not a short-term gain. Expect to hold for a minimum of five years to reduce the impact of these costs. If you decide to sell your investment property inside that period, understand the costs and your true position before you take the leap.

2. It’s a solid performer

Getting good yields (>5%)? Seeing strong capital growth in the area? Positively geared? No major maintenance on the horizon? No trouble getting solid tenants?

The impetus to sell in this case is probably small. If it’s not costing you any money to own (i.e. positively geared) and all indications are that it’s delivering a good return on your money, perhaps holding is a reasonable plan right now. That said, selling when everything’s looking good is obviously much easier than waiting till something goes wrong…

3. High potential for growth

When I moved to Perth in 2005, people were arriving from the eastern states to live and work at the rate of 1,000 people a week. That rate kept up for around 7 years. What do you think the impact of 50K+ new residents arriving each year is on real estate in a city with a population of 1.9 million?

You guessed it – first it drove up rent, then it drove up house prices. If you bought in 2003, you were sitting on a gold mine within 4 years as house prices nearly doubled across Perth. Rents were increasing at staggering rates in high demand areas – 20% per annum in some cases. Seeing this influx of new residents due to the mining boom, would you sell or hold? I’m guessing you, like most who had the choice, would hold.

How about now? To carry on with the Perth theme: major capital spending in mining has slowed dramatically. Iron ore prices have taken a hiding. People are finally leaving WA at a greater rate than those arriving. Rents are dropping – city apartments that rented for $1,250 a week in the boom are now struggling to find tenants willing to pay $700 a week. Sale prices have held fairly steady, but there is no doubt demand in the sales market has dropped off since mid 2014. When demand falls, prices must follow to some degree. In this kind of market, the temptation is to sell. Of course, anyone with time travel abilities would go back and list their property for sale in early 2013 when the market was still buoyant and high demand would help achieve a decent sale price. Listing your property for sale now may mean you make less profit than you may have expected a couple of years ago.

The trick is to balance your expectations of growth with sale timing. Do you hang on till you’ve eked out every last drop of growth, accepting the risk that you may overshoot the peak to see your profits decline? Or do you get out a little earlier, risking a smaller capital gain but finding the market more favourable? Not a good decision to make emotionally, so plan ahead by keeping an eye on forecasts and population trends.

4. It’s a key part of your strategy

Does your financial strategy hinge on passive income from an investment property? Do you rely on the deductions you achieve through real estate to keep your tax manageable? Do you need the equity you can achieve through property to take the next step in your plan – developing, subdivision etc? These are good reasons to hang onto your investment.

My key reason for investing in property is the income I’ll get from the rent when the mortgages are paid off (mainly paid off by the tenants in particular). It’s something akin to an annuity in my mind, but linked to inflation as rent will increase as the economy grows. Here’s how the math works for me with one of my properties:

I bought a 2 bed, 1 bath apartment in Taringa, QLD in November 2001. Initial outlay was $30K, purchase costs were in the order of $3K and I spent $6K on renovations. The apartment became positively geared within 5 years, and prior to that cost me around $5K a year on average, including a kitchen replacement and new air conditioner. It’s now generating around $7K a year profit and the mortgage is steadily reducing. Current rent is $315 a week – not bad for a property I got for under $105K (current value is around $300K).

Disregarding inflation, my costs amount to $64K, give or take. I’m earning $7K per annum (p.a.) currently, which is around 11% p.a. return on my cash. When the mortgage is paid off (thanks to my tenants since this investment property is positively geared) I can expect to earn closer to $13K p.a., which is a 20% p.a. return on my cash. And at the end of it, I still have the capital asset in which I currently have around $250K equity. I’d need a pretty impressive annuity deal to guarantee similar returns given current annuity rates are in the order of 6% (due to low interest rates).

If I sold now and took that $250K equity to buy an annuity at 6%, I’d earn $15K a year. So today, it’s marginal which is the better investment. I could probably do just as well with the equity if I invested it elsewhere. However, if it weren’t for that property I might not even have that $250K. I would have had to execute some pretty impressive investment strategies elsewhere to turn $64K into $250K – a nearly four-fold increase – over the last 14 years given the financial crisis. Also, if I lock myself into a 6% annuity, I could be missing out on significant income increases if interest rates rise. Rent will generally keep up with the market so I’m getting the potential upside. And finally, annuity deals can be structured to consume your capital – so you get higher payments – or keep some or all of the capital for a pay-out at the end. At least with property you always have an asset.

Bottom line, rental income is key to my strategy, so I’m holding. How about you?

Selling investment property | %%sitename%%

Property part of your investment mix? Don’t lose sight of the overall plan

5. You don’t have a home mortgage

Remember my first reason I mentioned – selling an investment property to pay off a mortgage? If you don’t have a home mortgage, you’d be looking to invest that cash somewhere else. Real estate, shares, indices, foreign exchange, commodities… whatever. It’s got to go somewhere, and preferably somewhere that’s going to make you a tidy profit.

Locking in a saving of 10% p.a. by putting it against your home mortgage is a no-brainer. But you can’t guarantee 10% returns on your investment cash. Sure, many people can and will do better than 10%, but there’s no guarantee. So do the math – are you confident you could do better elsewhere? If not, perhaps it’s a good idea to hold.

Example scenario

Let’s take a hypothetical situation as a way of working through the above reasoning and calculations. If you’d like a copy of the Excel spreadsheet I use to do these calculations, please sign up here and you’ll get a copy immediately.  Onto the example:

Let’s say a portfolio consists of two properties:

Property A is the principal place of residence (i.e. home) purchased last year:

  • Original deposit = $300K
  • Mortgage = $700K
  • Current estimated value = $1.1m
  • Equity = $1.1m – $700K = $400K
  • Interest on mortgage = 4.9%
  • Loan term = 30 years
  • Repayments = a bit less than $3,800 per month

Property B is the investment property purchased a decade ago:

  • Original deposit = $100K
  • Initial mortgage = $150K
  • Current mortgage balance = $100K
  • Positively geared from sixth year
  • Total ongoing costs till positively geared = $40K
  • Current estimated value = $700K
  • Equity = $700K – $100K = $600K
  • Interest on mortgage = 4.9%
  • Loan term = 30 years
  • Repayments = $530 per month
  • Rent = $590 per week
  • Ongoing costs = 20% ($118 per week)

Key calculations

First, let’s look at Property A:

Over 30 years, the total repayments made will be just ten grand shy of $1.4m. That’s nearly twice the original value of the mortgage. So it didn’t cost $1m as originally paid, it cost $1.7m – a 70% increase. This assumes:

  • You paid off the mortgage at the agreed minimum monthly rate
  • It took the full 30 years, with no offset of extra payments
  • You maintained 4.9% interest rate (laughable really – 7% would be a better average to use)
  • Inflation is not taken into account

If you’re wondering how I calculated that total: I like to use the CBA home loan calculator. I use it because that’s the institution my loans are with, there are many other calculators you can use.

In addition, you paid $1.7m of after-tax money, so you probably had to earn around $2.4m to do that (if your tax rate is around 30%). Not such a bargain now, is it. Ah, the price of living in a home you love with no rental inspections…

Now let’s consider Property B:

If you owned this property, chances are you’d be pretty happy right now because it’ providing you with some income. But let’s do the numbers anyway. First up, yield:

  • Before costs, you’re earning $590 per week * 52 weeks per year = $30,680
  • After costs, you’re earning ($590 – $118 = $472 per week) * 52 weeks per year = $24,544.
  • The purchase price was $100K deposit + $150K mortgage = $250K
  • So your yield is:
    • $30,680 / $250,000 = 12.3% before costs, and
    • $24,544 / $250,000 = 9.8% after costs.

These are very respectable yields. However, I’d guess that the rent is a little low at $590 per week if the property is worth $700K – that’s $84 per $100K, where I would hope for closer to $100 per $100K. Perhaps there’s a good reason: maybe the property is run down, or common, or there’s lots of competition. Either way, I’d be asking for a rental appraisal.

Total input in the first five years was $100K deposit + $40K to maintain = $140K (I’m ignoring buying costs for this example). After that, it’s making you a profit of around $18K a year until the mortgage is paid off, which is 13% return on your capital (ignoring inflation effects). After 30 years total, the mortgage is fully paid and you get the full benefit of the yield. It all looks solid, pending no surprises.

So what’s the debt to equity ratio (D/E) of the portfolio?

Total debt (D) = $700K (Property A) + $100K (Property B) = $800K

Total equity (E) = $400K (Property A) + $600K (Property B) = $1m

D / E = $800K / $1m = 80%

This is the limit of what most banks will allow and indicates that risk is manageable provided cash flow is sufficient to service the loans. Assuming that’s the case, you’re in good shape.

Potential options

So, what are your choices? There are roughly 3 options:

  1. Keep both investment properties
  2. Sell Property B and put all proceeds against Property A (whether by paying down the mortgage or putting it in offset)
  3. Sell Property B and put some profit against Property A, while using the remainder to secure another, cheaper Property C.
Selling investment property | %%sitename%%

Time to choose – which option makes the most financial sense?

1. Keep Property B

You’re earning a passive income from the investment property, so you could conceivably direct that cash towards repayments on Property A. Assuming 30% tax on the $18K you’re making a year, you’ll have $12,700 to do that with – that’s over three months of repayments each year on Property A. In addition, you’ll still have a solid investment whose income will increase if interest rates increase (as happens in times of growth) – so you’ve got a bit of hedge against interest rates impacting your Property A repayments.

The limitation is that you’re maxed out on your D/E. You won’t be able to borrow significant sums of cash again until you build up more equity, and that’s assuming your cash flow can keep up.

In the end, you’re still paying $2.4m for a $1m home, but you’ve only got to front up around 70% of that cash – the rest comes from rental income on Property B.

2. Sell Property B, put all profit on Property A

Let’s say you sell for $700K and it costs you $30K to sell. After discharging the $100K mortgage, you walk away with $570K. If this property wasn’t your principal place of residence when you bought it, you’ll be capital gains tax when you do your income tax return. Assuming the original cost was $300K ($250K purchase + $50K costs) and your marginal tax rate is 30%, your tax is calculated as follows:

  • Profit from sale = $700K – $30K sale costs – $300K purchase = $370K
  • 50% will be taxed = $370K / 2 = $185K
  • Taxed at 30% = 0.3 * $185K = $55.5K

So your cash balance after settlement and tax is $570K – $55.5K = $514.5K.

If you wanted to put 100% against Property A, you could either:

Pay down the mortgage

In this case:

  • Your mortgage becomes $185.5K, with 29 years remaining on the term.
  • The new monthly repayment is just shy of $1,000.
  • You now have a $1.1m asset with $185.5K debt, so your D/E becomes $185.5K / ($1.1m – $185.5K) = 20.3%.
  • When you’ve paid off that loan, you will have paid the bank $365K on that mortgage. Added to the $3,800 a month you paid for 12 months, you’ve spent $3,800 per month * 12 months + $365K in remaining repayments + $514.5K profit from Property B + $300K initial deposit = $1.26m before tax. That’s a damn sight better than $1.7m.

You no longer have a passive income from the rental property, but your outgoings are significantly reduced. You can probably borrow for another property quite easily, either by saving up a new deposit or securing against Property A.

Put the profits in an offset account

When you use an offset account, the positive balance is held against your mortgage and you are charged interest on only the difference between the mortgage and offset balances. In this case, you’d still have a mortgage of $700K which requires $3,800 a month repayments, but you’re only being changed interest on $700K – $514.5K = $185.5K. The end result is you pay off the loan much quicker – in fact you stop being charged any interest in 4 years and 8 months after the Property B sale, when your offset account balance overtakes your loan balance. Your loan is completely paid off in 16 years and 3 months if you continue to pay at $3,800 a month.

Compared with paying down your loan:

  • Your D/E becomes:
    • D = $700K
    • E = $1.1m – $700K + $514.5K = $914.5K
    • D/E = $700K / $914.5K = 77%
  • You will pay $3,800 per month * 207 months (17.25 years) + $300K from the initial deposit = $1.07m after tax.
  • You’ll also still have the $514.5K in the offset account, which you can then use as you see fit.

As you can see, either option works. If you pay down the mortgage, you reduce your debt and slash your repayments by more than 70%. If you use an offset, you keep your repayments high, but you significantly reduce the time taken to pay off the loan. It’s a question of preference – which are you more comfortable with?

I prefer the high repayments with cash in offset. That way, I can access a large amount of cash whenever I want if the right opportunity comes along, or a ‘rainy day’ happens. I figure I can always pay down the loan if I can no longer service the higher repayments, but no need to do that until I really want to. It’s much harder to access the equity once you’ve paid it off the mortgage, as you need to apply to the bank. In an offset, it’s liquid and you can take it any time. It does however reduce your capacity to borrow, as the bank knows you can whisk your money away so doesn’t consider it as a security in their calculations.

3. Sell Property B, put half the profit on Property A and use the remaining half for a new, cheaper property

This hybrid option is an attempt to get some of benefit of a reduced mortgage on your home without forgoing all the advantages of having a rental property. So what would this look like?

Based on the profits of $514.5K, let’s say you plan to put $264.5K against Property A and $250K you will use for a new purchase, Property C. Here are your new calcs:

  • If you pay down the mortgage on Property A, you will find:
    • The mortgage balance becomes $700K – $264.5K = $435.5K
    • Based on a 29 year term remaining at 4.9%, your monthly repayments are now around $2,400 per month ($848K total)
    • Your D/E, incorporating the total profit ($514.5K) is calculated as:
      • D = $435.5K
      • E = $1.1m – $435.5K + $250K (remaining profit) = $914.5
      • D/E = $435.5K / $914.5K = 48%
    • You’ll pay $848K + $3,800 * 12 months + $300K initial deposit + $264.5K from Property B sale = $1.5m total for Property A
  • If you use an offset account, instead you’ll find:
    • Repayments are still $3,800 per month
    • Your D/E, incorporating total profit ($514.5K) is calculated as:
      • D = $700K
      • E = $1.1m – $700K + $514.5K (remaining profit) = $914.5
      • D/E = $700K / $914.5K = 77%
    • You stop being charged interest after 13 years and 3 months after starting the offset account
    • You finish paying off the loan 19 years and 3 months after starting the offset
    • You’ll pay $3,800 * 20 years and 3 months + $300K initial deposit = $1.2m total for Property A
    • You’ll still have the $264.5K at the end of that.

Phew! Did you get all that? Now what happens when you throw in Mystery Property C…

How much would the banks lend you to buy another investment property? Let’s assume you pay exactly what Property C is worth (i.e. you have no equity beyond your deposit at purchase). This means your equity remains the same in both cases – $914.5K. It’s pretty simple, but if you hate algebra just skip the next few dot points.

Assuming we can have a maximum D/E of 80%, the calculation for how much additional debt you can have is 80% * current equity ($914.5k) minus current debt:

  • In the case where the loan was paid down to $435.5K, you can borrow another $296K before hitting 80%
  • In the case where the loan stays at $700K, you can borrow just $31K before hitting 80%

If you use the $250K leftover profits, you can afford a total purchase (including fees) of $546K for the paid down loan or $281K for the offset option. This also assumes you have the cash flow to service the new loan and that the bank agrees to finance the particular property you choose. Pretty big difference huh.

Anyway, there’s three worked options for you to consider. As I mentioned, just fill out the contact form with a request for my spreadsheet if you so desire.

What’s next?

There’s a hefty amount of info in this post. If you don’t know where to start, consider taking these actions:

  1. Check the performance of your investment property (or properties if you have more than one)
    1. Get an updated rental assessment – are you charging enough rent?
    2. Get an updated sales estimate – what could you expect to sell the property for?
    3. Calculate your yield for each property – are you happy with performance?
    4. Calculate your overall D/E – are you within 80%?
    5. Check against your strategy – is the property delivering what you wanted?
  2. If you think you might want to sell, run scenarios based on those options above. Which makes most sense to you (financially and in the ‘not losing sleep’ sense)? Again, let me know if you’d like a spreadsheet to assist.
  3. Take action if it’s warranted! Don’t fall into analysis paralysis – give yourself a couple of hours to run the numbers, see what they’re saying and then take action accordingly. Remember these words from Theodore Roosevelt:

‘In any moment of decision, 
the best thing you can do is the right thing, 
the next best thing is the wrong thing, 
and the worst thing you can do is nothing.’

If you’re after a copy of that spreadsheet, click here to get it.


We teach adults how to get on top of their finances so they can stop work sooner and stop losing sleep over money. Part of that is, of course, teaching them how to get into the situations you’ve just read about in the first place. If that sounds good to you, check out our course on Achieving Financial Independence.

You may also like to check out our Facebook page, where we share articles and video tips. Given you’re reading about bankruptcy, you may be interested in reading our tips on credit cards, avoiding the Struggle Street trap, and some wonderful free and cheap financial education resources you can access, including people to talk to for advice.

For those in debt and not quite at the stage of bankruptcy, we also have a free course called ‘Get out of debt fast’. You’ll find it on our homepage.

132 replies
  1. John rodgers
    John rodgers says:

    hello, my wife and I are trying decide wether to sell investment property to pay off our mortgage quicker, we estimate that we can then pay our property off in 2 years rather than 10 years. Thank you for your knowledge, could I please have a copy of your spread sheet that you used for your calculations.???? thank you once again

    • Lacey
      Lacey says:

      Hi John, just following up on the comments on this blog – could you please let me know if you received a copy of the spreadsheet? If so, I’d love to hear what you thought of it. If not, I can send through a copy tomorrow if you’d still like one. Kind Regards, Lacey

    • Lacey
      Lacey says:

      Hi Sally, thanks for your comment. I’ve just been refreshing this article and noticed it, but I don’t think I got an email through our contact form so you may not have received the spreadsheet. Apologies if that’s the case – just let me know if you’d still like a copy 🙂 Kind Regards, Lacey

  2. Mel
    Mel says:

    Hi Lacey, Thank you for your blog, was googling for advice in trying to decide whether to refinance our previous PPOR property (1hr away from Sydney) or purchase a place for my family and i to live in (closer to work, but houses are $1.2m) We don’t have any debt (apart from mortage), we have 3 kids or should we just purchase a couple of properties in Goldcoast or rural area? I’m over property inspections & kids would like to have their own space. Anyways that is how I came upon your website. Thank you again. Also, would love to look at your spreadsheet too, maybe that will help me make a decision.

    • Lacey
      Lacey says:

      Hi Mel, thanks for your comment and for subscribing 🙂 Sounds like you’ve got some decisions to make. I’ve emailed you separately with the spreadsheet and some instructions. I look forward to hearing how you go with it. Cheers, Lacey

  3. Jo
    Jo says:

    Thank you I found the whole article easy to read and very helpful

    Can I please have a copy of your spreadsheet.

    Many thanks.

  4. Geraldine
    Geraldine says:

    Hi Lacey, i have an investment property in Canberra that i been holding for 4 yrs now. The price did not go up since i bought it due to influx of units. I’am currently neutrally geared. But i’m thinking to sell the property now as there are more units coming up in the next few years so i think there will be no capital growth for the next 5 to 10 yrs as predicted by agents. My property is close to the proposed light rail. Should i sell it considering that construction of light rail started already.

    • Lacey
      Lacey says:

      Hi Geraldine, the spreadsheet is on its way to your email now. I’ve included some detail about your question in the email, but for the benefit of other readers here are some points to consider:
      1. Is the purpose of the property to provide passive income, or capital growth?
      2. If it’s passive income, how long till it will be positively geared? Will the rental return meet your goals?
      3. If it’s capital, 4yrs is not long to hold a property. Do you have equity, counting cost of sale? Or will you walk away with debt?
      Hope these points are helpful and that the spreadsheet is useful. Best of luck with your decision making.

  5. Om
    Om says:

    I stumbled upon this article whilst searching for information on selling vs holding PPOR after purchasing new property.

    Lacey, I will really appreciate if you can send me a copy of the spread sheet please.

      • Om
        Om says:

        Thanks. Received the spreadsheet.

        We have a PPOR that we have been living in for the last 8 years. Capital growth has been @ 7% per annum. We are building a house which will be our new PPOR. The construction loan is secured against our existing PPOR.

        If we convert PPOR to investment, the property will be neutrally geared. If we sell it the bank may force us to reduce the balance of new PPOR.

        I am in late 30s and my intention is to reduce my tax liability.

        Any suggestions?

        • Lacey
          Lacey says:

          Hi Om,

          A couple of things for you to consider (you may already be aware of these):
          1. If you’re neutrally geared, you won’t get much – if anything – in the way of tax minimisation regarding your annual income tax. I personally think that’s a good thing – neutral or positively geared properties are what property investing is all about, because the income from them can supplement your wages when you’re ready to work less/retire.
          2. As the to-be-investment property was your PPOR, you’ve got six years to sell it without needing to pay capital gains tax provided you don’t sell any other PPORs in that period (though keep an eye out for any changes in this policy – politicians regularly threaten to get rid of it).

          I’d be thinking about how the investment property would fit in with your strategy. Do you want property? If so, keeping a previous PPOR can be good – even if you go past 6 years, you can pro-rata the time spent as a PPOR, so make sure you get a valuation when you move into the new house so you can use that for any future tax calcs.

          That said, I personally prefer to pay down as much debt as I can on my home. There’s no tax benefit to that debt. I guess it’s about your personal preference and how much debt you think you can sustain.

          Hope that helps 🙂

  6. Bruce
    Bruce says:

    Great article and informative especially for me a ‘mum & dad’ investor. Thank you.

    Can you please send me a copy of the spreadsheet.

  7. Alfredo
    Alfredo says:

    Hi Lacey,
    Contacting you from the other side of the world.
    Very informative and easy to read your article and with lots of helping calculations to work with.
    I want to enter the investing on real estate world so having your spreadsheet would help me to better understand it and help to diversify from financial assets.
    Would you please email me the spreadsheet

  8. Sue List-Armitage
    Sue List-Armitage says:

    Hi there I have left a couple of requests for he excel spreadsheet from the article. Would it be possible to please have the spreadsheet emailed as I am currently weighing up our options of selling out investment property? Many thanks Sue

    • Lacey
      Lacey says:

      Hi Sue, sorry for the delay. I replied to your original request the day before your comment, so perhaps my emails aren’t getting through to you. I’ve replied again today without an attachment to see if that makes a difference. Please check your Junk folder, and anywhere else Gmail likes to hide emails. If you’ve got the emails, please reply to let me know. If they haven’t come through, perhaps you can comment to suggest another email address I might try? Or add my email (lacey at moneyschool dot org dot au) to your contacts list and I’ll try again?

  9. Robert Michael
    Robert Michael says:

    Hi Lacey,

    Great article. I’ve had an apartment in West Perth for 6yrs now that has been ‘almost’ neutral, but Im considering selling it (for a loss) as I just cant see any capital growth occurring over the next 5+ yrs, and cant see the point of just sitting ‘neutral’. Id live a copy of your spreadsheet so I can run a couple possible scenarios.


  10. Natalie
    Natalie says:

    Great article, thank you. We have an investment unit in Perth. It has dropped in value a lot and so has the rent. We have a $410k mortgage on it and we would be lucky to get $330k if we sell. The rent has dropped from $430 per week to $290 per week and it was empty for 5 months. The strata is nearly $700 a quarter. It cost us $17000 while empty. I want to sell and add the loss to our home mortgage. This place causes me so much stress. We could pay our own home off in 8years if the unit was gone. It is a constant problem. My husband thinks we should keep it for another year to see if values go up. After reading your article I want to sell. What would you do? Thanks so much for the advice.

    • Lacey
      Lacey says:

      Hi Natalie, the spreadsheet it on its way to you now. I hope the spreadsheet helps you have a conversation with your husband looking at the numbers as well as thinking about the stress – losing sleep is costly! Your story is a common one in Perth at the moment. It’s a really hard decision to make when you know selling will still leave you with debt to pay off. I’d be looking at the numbers in the context of your full financial position and deciding if you think it’s worth the stress to hang on. Best of luck with the decision – hope the article and spreadsheet help 🙂

  11. Adam Wright
    Adam Wright says:

    Hi Lacey,

    Good to read some local advice for once, instead of hearing all the east property boom news.
    Have a Perth rental since 2006 and made a bit of profit initially, but not much since. Cant really see much happening with growth in next few years and rents are dropping, so thinking to get out, but want to make the most of the small gain.
    Would like the spreadsheet to look at some numbers please.

  12. Garry Cobb
    Garry Cobb says:

    Good morning
    Thanks for the information on your web page as my wife has just lost her job and we are considering selling a rental property to reduce debt.
    Can I have a copy of the spreadsheet as well please.
    Many thanks

    • Lacey
      Lacey says:

      Hi Garry, thanks for your comment. Sounds like a good time to look at the numbers! The spreadsheet is on its way to you now 🙂

  13. Christina
    Christina says:

    Hi, so i have an investment 1bedroom unit bought 7 years ago close to amenities in wealthy suburb for 312k and is now worth 290k we owe 295k mortgage. We get rent of $245 weekly and outlay 5k yearly on running costs. There are a lot of units going up and im afraid we wont see any more capital growth. The unit will need around 4k to bring up to scratch in order to sell. Should we cut our losses and end up with a debt after selling fees and concentrate on paying off own home plus debt. Im struggling with making no profit and the reality of forking out more money to pay the difference. Whats your advice?

    • Lacey
      Lacey says:

      Hi Christina, thanks for your comment. It’s hard to give you advice without knowing your full situation, so probably best to see a financial advisor for a chat (do a free ‘discovery session’ – maybe even with several potential advisors!) Problem is, if you sell, you’ll be left with a debt (at least $5k + costs of sale, such as commission to the agent). It’s a hard decision to make. I’d be weighing up whether you’re better off to get rid of it from the perspective of stress – sounds like it might be costing you sleep.

  14. Keith P
    Keith P says:

    Hi Lacey,
    Excellent and very relevant blog. I’m from Brissy and we bought a townhouse in Perth in 2009, got good equity that allowed us to move back to QLD and buy on the Gold Coast. We have seen a financial advisor and surprise surprise they agree with what we suspected about flicking the Perth property. I think it’s a good idea but I’d love to crunch the number myself if you don’t minding emailing me your spreadsheet. Thank you so much for your sensible blog and generous spreadsheet. I’m going to talk to my wife about your moneyschool program. It looks great. You rock! Cheers, Keith

    • Lacey
      Lacey says:

      Thanks Keith, glad you liked it 🙂 The spreadsheet is on its way through the ether to you now. Hope it helps you with your decision.

  15. Mark Lines
    Mark Lines says:

    Hi Lacey,

    Your article lays out all the options perfectly. I would love the spreadsheet if possible please.
    I have written the below more for my own crack at it but in case you have time to respond here is our situation My calculations could be wildly out and please excuse my workings too!!

    Myself and my wife have been grappling with selling our investment property which is our former PPoR in Sydney’s inner west to help pay down or hefty mortgage on our recently purchased 3rd PPoR. We now have the 2 properties:
    Current PPoR – Value – Approx $1,500,000. Debt – $1,210,000 (80.6% D/E)
    Investment – Value – Approx $1,100,000. Debt – $500,000. Purchase costs approx $530,000 . This was bought in Dec 2007 and has been rented since May 2010. Currently at $710 a week.
    As I am going through a career change my income is reduced and my wife is the main earner at present. I feel we would be better paying down a large chunk on our PPoR as a safety move and look at investing in property in other areas.
    In CGT terms, the unfortunate thing is we are now outside the 6 yr rule. Is there a way that the 6 yrs can be taken into account rather than using the ratio of time as PPoR vs Investment?
    With the this rule I estimate the following – Time rented = 85 months out of 114 – if we were to sell in a few months) = 75% of the capital gain
    .745 * $550k ($570k – $20k selling costs) = $412.5k
    Minus the 50% CGT discount = $206.25k
    CGT payable on $206.25k 50/50 for my wife. Allowing for our individual tax rates = approx $76k
    $600k profit – $20k costs – $76k = $504k to either pay off the mortgage, put into offset or a mixture of both (with a view to building a property portfolio).

    Phew, that was fun!

    Either way thanks so much for your article.
    Mark – Northmead

    • Lacey
      Lacey says:

      Wow, thanks Mark – great to see your worked example! Very similar to the spreadsheet, which is winging its way through the electronic cloud to you now. Hope you find it helpful 🙂 If you get away with $20k selling costs you’ll be doing well – I’ve typically seen 2.5 – 3% of the sale price for agents commissions, then add conveyancing to that. Apart from that, your calcs look good to me, and I’m sure it will feel great to knock $500k off that PPoR mortgage (or at least put it in an offset so you reduce your interest bill). Best of luck with it 🙂

  16. Vicki
    Vicki says:

    Hi Lacey,
    Great informative article!!!I have a question in relation to PPOR.
    I own a property thats solely in my name where myself ,Husband and 2 Children live.
    We have purchased a house and land that we are going to use as an investment property and will be owned solely by my husband .
    TO avoid capital gains in the future could our family move into the property for say 3-6 months initially then use it as an investment property.
    If the property was sold in say 3 years time what would be the tax implications??

  17. Amber
    Amber says:

    Hi Lacey~ Would you please send me your Excel spreadsheets? I am in the middle of a very hard decision re: selling or moving back into my rental. It is my first and only ever owned home. I bought it new at the height of the bubble in 2007. It has gained less than $100K in value over the last ten years and moreover, the neighborhood is not highly sought after (though it is in Seattle…) I currently rent but I LOVE my neighborhood. I don’t really want to move back into the rental. However, I don’t have much liquid cash so I don’t like the thought of gambling on damage that the next tenants may cause. I also haven’t been able to find new tenants to replace my current tenants who are moving out this month. I must make this decision ASAP…please help!!! Thank you~

    • Lacey
      Lacey says:

      Hi Amber, the spreadsheets are winging their way through the electronic ether to you now. I can imagine how tough this decision must be for you, and I can’t see an easy answer. I am not familiar with the US market (I’m in Australia) so I’ve got no insights for you there. I’m wondering what Seattle’s property market is doing – are prices staying stagnant? Are they likely to stay that way? And if you sell, will you kick yourself if the prices do go up? Sometimes the stress factor is a big one – will you sleep better not having to worry about that property if you sell it? I’d definitely recommend investigating Landlords insurance if you decide to keep it and rent it out – not sure if that’s in the States too? We have it in Australia, and it’s to protect landlords against malicious damage or tenants who skip out without paying their rent.

  18. Matt
    Matt says:

    HI Lacey,

    Interesting what happened in Perth. Toronto is at its highest ever annual increase. My neighborhood is up 43% from last year? Time to sell?

    Can you please send me excel sheet? Thank you!!!

    • Lacey
      Lacey says:

      Hi Matt, wow that sounds like a big temptation. The spreadsheet is on its way to you know. Hope you find it helpful 🙂

  19. Angus
    Angus says:

    Hi Lacey

    Can you please send me copy of the spreadsheet? Thank you kindly
    I am on the progress to sell my 2 investment properties to pay my new land purchase
    You have done what I am thinking and possible scenario

    Best regards

  20. Shane
    Shane says:

    Fantastic article Lacey and a real help for my current decision making. Would you mind sending me a copy of the spreadsheet as well?

    Kind Regards,

  21. David
    David says:

    Useful article, thanks!
    Trying to decide whether to hold or sell our investment property when moving back to Australia soon after a few years abroad. Will be purchasing a new PPOR so reason #1 looms large, but have only held it for a few years and capital growth (in Canberra) not as impressive as some other cities..
    I would appreciate if you could send a copy of the spreadsheet.
    Thanks again.

  22. Josh
    Josh says:

    Hi Lacy,
    Very interesting and informative article.
    Can you please send me a copy of the spreadsheet.
    Thank you so much.


  23. Adrian
    Adrian says:

    Hi Lacey,
    I just sat down tonight to work on this very question and a quick search on the net for some guidance lead me to your site which has been so informative. Could you send me the spreadsheet? Math is not my strength but your blog seems easy to follow and has been a big help so far, just prompting some questions to consider which i hadnt thought about.
    Thanks so much!

    • Lacey
      Lacey says:

      Thanks Adrian, I’m thrilled you found it so useful 🙂 I’ve emailed you the spreadsheet, let me know if it doesn’t arrive. Best of luck with your decision making 🙂

  24. Chris V
    Chris V says:

    Hi Lacey,
    Thank you for freely sharing this article you spent a fair amount of time writing. I really enjoyed it and would like to ask for a copy of your spreadsheet, please.
    I have several units on the Gold Coast that I bought during the GFC for a discounted price. They have been successfully tenanted during this time, but the cash flow is becoming a problem with a growing family and I need to work out how much my cashflow will improve if I get rid of them both after all the costs are weighed up.

  25. Jenny
    Jenny says:

    Hi, thanks for your interesting blog. In my situation, my current home is mortgaged against 2 investment property’s that have both declined in value.
    Property 1 purchased for $330,000 has been recently valued at $210,000 but I still owe $270,000. I get rent of $300 per week. The thought of losing $100,000 makes me sick to the core. This house is in the country so will take time 5-7 years minimum to go up in value, but we have good tenants & can afford $100 week to keep this going if it is worth it or do I just cut my losses?
    Property 2 cost $150,000, owe $149,000, valued at $110,000, good tenants paying $200 week rent, also in the country. This property is in need of ongoing repairs also as it is very old.
    I would ideally like to keep both- is it worth holding onto for another 5 years to see if market recovers & while I can afford?
    The bad thing is I don’t own my own home on paper as mortgaged to the bank as security over these loans above but I don’t owe any money on my home which is valued at approx $550,000.
    I would love your advise & spreadsheet please. Kind regards- Jenny

    • Lacey
      Lacey says:

      Hi Jenny, that’s a tough situation. I can’t give you specific advice, but I can certainly relate to how you feel – I sold a property at a loss a few years ago, and it sucked at the time, but now that I’ve seen the Perth market go backwards I have been thanking my lucky stars that I sold when I did. That said, I walked away with cash – I think perhaps I would have tried to hold on if I’d been left with debt. I’d be thinking about two things: 1. Do you think the 5-7yr growth cycle will apply for these properties? 2. Can you sleep well at night if you keep them?

  26. Claire
    Claire says:

    Thanks for this article. Some really useful points here.
    We’d appreciate a copy of your spreadsheet please to help with our decision-making…

  27. Ben
    Ben says:

    We are wondering about the pros and cons of selling our investment property in Sydney… Your article asks the questions that we’re asking ourselves. Can I get a copy of the spreadsheet please?

  28. Jacquie
    Jacquie says:

    Spreadsheet please!
    Trying to work out whether seelingbour primary residence or investment is a good idea to buy a bigger primary residence.
    Investment =$310,000 owe $280,000.
    Primary =$420,000, owe $80,000.
    Both exceed $100 for every $100,000 when rented but low overall growth for both. New primary residence would be approx $500,000.

  29. ashok
    ashok says:

    Many Thanks for the article and very useful for understanding the insights of property selling.I am also considering selling my investment property in Melbourne and thinking to buy for living in expensive Sydney down the track.

    Please send the spread sheet.

  30. Clark
    Clark says:

    Thank you for the very informative document, understanding how to deal with the financial aspect of property investment is certainly very helpful for me.

    Please send me the spreadsheet.

  31. Rafael
    Rafael says:

    Hi! Great article! Can I please receive the spreadsheet? I’d like to run some calculations here :). Thanks for sharing your knowledge 🙂

  32. Sateesh
    Sateesh says:

    Thank you for the very informative document, understanding how to deal with the financial aspect of property investment is certainly very helpful for us. We are in this cross road and stuck for more then three weeks, article helps to make decision with confidence.

    Please send me the spreadsheet

  33. Cas
    Cas says:

    Hi Lacey,
    I would love a copy of your spreadsheet please as we are trying to decide whether or not to sell our investment property in Melbourne at a loss or keep holding on. We have had it for 7 years and it is currently valued at $50,000 under our purchase price. Will be seeking independent financial advice but the spreadsheet will assist us prior to meeting with advisor. Thanks in advance.

  34. Anna
    Anna says:

    Hi Lacey
    I purchased an investment property in Brisbane last year which, based on recently looking at sale prices of properties in the area, I would say I paid too much for and is possibly in negative equity. I’m currently paying interest-only on the loan, as recommended by my accountant – am I better off starting to pay off some of the principal now in order to reduce my future exposure to debt on the property? Or continue saving that money for a deposit on a better (smarter) purchase in a different area next year, to diversify and balance my portfolio out?

    • Lacey
      Lacey says:

      Hi Anna, I can’t give you specific advice without knowing your full situation, but here’s a few things to think about:

      You’ve got two choices: ride it out and hope that prices go up, or sell and take the loss. Can you afford to wait? How confident are you that prices will eventually go up for that property? Did you buy for capital growth, or are you more interested in the yield?

      Transaction costs on property being what they are (stamp duty, agent commissions etc) it’s always a big call to sell quickly.

      Regarding debt: anything you can do to reduce the loan principal increases your equity and decreases how much interest you are charged on the mortgage. If you’ve got the spare cash, decreasing debt is worth considering.

  35. Vrinda
    Vrinda says:

    Hi, we are a mature age couple- age 53. We have an investment property in Gold Coast ( an apartment in Broadbeach) that was bought two years ago for $410000. I want to now buy a home in Brisbane costing $55000 ( another inner city apartment). My investment property is positively geared. Should I sell it to buy my home in Brisbane? My estate agent advices that I could get $465000 from the sale of my investment property. Please advice. Also, could I please have your spreadsheet?

    • Lacey
      Lacey says:

      Hi Vrinda, thanks for your comment. The spreadsheet it on its way to you now. I can’t give you specific advice on this, but here’s a few things to consider:
      1. Owning your own home without a mortgage before you retire is an excellent aim to have. Do you have enough capital and cash flow to make that happen if you buy the Brisbane property without the equity from the investment property?
      2. Did you buy the Broadbeach property with the aim of having that as a cash flow source in retirement? Or did you intend to use any capital growth to help you secure a home?
      3. Two years is a very short turnaround for property, considering the stamp duty you paid for Broadbeach and would have to pay for Brisbane, and the agent’s fee on a Broadbeach sale. Make sure your projections and calculations account for that.

      Best of luck!

  36. Suzanne
    Suzanne says:

    HI Lacey
    thanks for the great article. I am feeling the stress of having an investment property that it seems as soon as we acquired it it dropped in value. we have had it for 10 years and stand to lose about $100k if we sell it. It has been a good tax break for my husband, but he is now not on the money he used to be on.
    Could you please also send me a copy of the spread sheet

  37. Wal
    Wal says:

    Hello Lacey

    Great article, I am also having a hard decision about if I should sell my investment property to buy a family home. I sold my family home back in 2013 as the capital growth was very slow. we then purchased an investment property in Melbourne while we were renting elsewhere. The property has now been valued more than double, original purchase price 430k and current valuation at 960k. its negatively geared so costing a bit of money. Townhouses are costing around 860k, I am not sure which direction to take so could you please advise

    • Lacey
      Lacey says:

      Hi Wal, that is a tough choice, complicated by the unavoidable emotions that come into play when you think of buying a home. In your shoes, I’d be considering:
      – the long term plan: are you happy to keep renting forever? Or is owning your own home important to you?
      – why you bought the investment property: was it to keep yourselves in the market so you could buy again later, or did you buy it to earn a passive income from through rent once it becomes positively geared?
      – cost of sale: you’ll be up for agent’s fees on the sale, and stamp duty on the new home, and capital gains tax on the profits (50% of $960k-$430k-cost of sale and any outstanding depreciating items etc, taxed at your prevailing marginal rate)*. It’s a big whack of change. What does that leave you in terms of cash to deposit on the $860k townhouse, and how big will the mortgage need to be? Can you afford that? This will be heavily dependent on your stage of life, complete financial situation etc. so it’s a big one.

      Lots to think about! Let me know if you want a copy of the spreadsheet so you can play with some numbers 🙂

      * Definitely talk to a property tax person about whether there’s any advantage to moving into the home for a few months before sale. I *think* coz it was a rental to begin with, you can’t get the primary place of residence capital gains tax exemption, but I may be wrong so please see an expert.

  38. Michael Jensma
    Michael Jensma says:

    Hi Lacey,

    Great article and can I please have a copy of your spreadsheet?
    I”ve got an investment property that I’d like to do the numbers on selling or holding on to.

    Thanks, Michael.

  39. Gwen
    Gwen says:


    What do you advise investors who lost a fortune in the Pilbara but who are still holding on unlike many others who have declared bankruptcy?

    • Lacey
      Lacey says:

      Hi Gwen, great question, and a timely one. I was chatting to someone just last week who had nine Pilbara properties. They’ve sold five, but four remain.

      My questions to anyone in this situation are:
      1. Why are you holding on? Are you hoping the prices will go back up and you’ll be able to either keep them as cash-producing assets, or sell them when they reach a position of positive equity? Or are you trying to avoid bankruptcy/loss of your home/something similar? If it’s the former – how long can you afford to pay that debt for before you’d be forced into bankruptcy? And do you think prices will actually reach that point again (really)? If it’s the latter – read on.
      2. What is the current equity position on the property/ies? If there is positive equity (i.e. likely sale value is higher than the mortgage), the bank will have a preference to foreclose and sell, redeeming their losses. If you’re in a negative equity position (i.e. the mortgage is higher than the likely sale value), you’re a liability to the bank. If they foreclose, that loss will hit their books. If you hang on, you’re tying up their lending capacity. Both are bad news for the bank. Believe it or not, the latter (negative equity) is a stronger negotiating position because the bank wants you off their books. The complicating factor is how your finance was arranged – is your home, or other assets, tied up in the guarantee of the loan – and what other assets you own.

      I’ve heard second- and third-hand stories of people negotiating to walk away from their Pilbara properties for a settlement of under 1% of the negative equity value, and the bank is happy to do this because they can get the loan off their books. I haven’t spoken to these people so I don’t know their overall position or the details of the negotiation, but this is different to declaring bankruptcy.

      I’d recommend Consumer Credit Legal Service WA ( as a first stop for free advice on these options, specific to your personal situation.

      I hope that helps.

  40. Josh
    Josh says:

    Hi Lacey

    Great read! In 2011 a purchased my first home which I lived in for just over a year. I started renting out the property at the end of 2012 and find myself with a decision to make whether I sell to avoid capital gains tax (would have been rented for 6 years late 2018) or hold onto it long term.

    The house was purchased for 240k and was recently appraised for 310k. It’s rented for $290 a week and it has always had a steady rental income. It is pretty much neutrally geared.

    Do you think I Am I best to sell in next 12 months or hold onto it long term?

    Could I please also have copy of spreadsheet.

    • Lacey
      Lacey says:

      Good question Josh, and there’s no right or wrong answer here. I’d be thinking about:
      – why you bought. Capital growth? Or yield? Or both?
      – do you want to own rental property as part of an income replacement strategy?

      Having the valuation is awesome. if you decide to hold, get another when the 6yrs is about to expire, then your CGT calcs are only on the prince increase from then, and remember you could move back in to reset your 6yr CGT exemption provided you don’t sell another principal place of residence in that time. Good luck 🙂

  41. dave
    dave says:

    great info and glad I stumbled on your blog. like many others I came here looking to make my mind up whether to sell the IP.
    bought 4ish years ago for 365,00 in regional NSW that boomed with the mines but is now valued at 45000 less than PP.
    Have just recently changed the loan to P&I to start paying something down on it.
    Currently rented at 320pw (went up from 300pw this month after real estates recommendation) signs of improvement in the area maybe?
    Still more or less owe the full 365k on the IP mortgage and having to find a substantial amount of extra cash each month to pay the loan
    Owe 460k on PPoR

    I would like to divert the extra cash I pay on this IP to my PPoR and after reading to informative blog I am still no clearer.
    your spreadsheet would surely help.
    I don’t not expect free financial advice but any hints on what you would do would be welcomed. 🙂

    many thanks and keep up the good work.

    • Lacey
      Lacey says:

      Hi Dave, great that you’re thinking this through. Spreadsheet is on its way, hope that helps.

      Given the location, I’d be thinking about whether an increase in price is likely in the next 3-5yrs and therefore whether to hang on. Since you’re having to pay extra above the rent, it’s not ideal to hang on unless a decent price rise is likely, and who knows if that’s the case (where’s that crystal ball when you need it?)

      With a mortgage on your PPoR, diverting extra cash to the home repayments is a great idea.

      I guess the gut feel test might be a good one here – if you sell, will you sleep better at night?

      Best of luck with the decision making 🙂

  42. Lorena
    Lorena says:

    Hi Lacey
    can I please get a copy of the spreadsheet
    Also I have a negatively geared property in Perth I can keep up with costs to run it but I would at a Loss when I sell and would still have a mortgage on it any suggestions
    Greatly appreciated

  43. Simon
    Simon says:

    Hi Lacey,

    Thanks for a very thoughtful and objectively written article! In view of retirement, we are going through similar decision-making times concerning our investment property. May I request a copy of the said Spreadsheet?

    Regards, Simon

  44. Chitrali Vyas
    Chitrali Vyas says:

    Thank you for an excellent article!.. I’m trying to work out if I should sell my investment property that used to be my ppor 4 years ago, please send me the spreadsheet thanks
    Cheers chitrali

  45. Min Dodds
    Min Dodds says:

    Hi, I wish I have read your article a bit earlier before I made the decision to sale one of our investment properties.
    It is very wise way to make decision base on the numbers. Great article and I think I have made right decision as I have met a couple of the reasons that you mentioned in your article why to sale.
    In order to prove that may I please the spreadsheet to show on the numbers.
    I enjoying read your blog. Well done.
    Warm regards

      • Tracy
        Tracy says:

        I put my information in at the link and clicked confirm on the email but no spreadsheet yet.
        Great article by the way. I read it to my husband last night and we are not sure whether we should sell one of our investment properties. Hopefully the spreadsheet will help with our decision making.

  46. Craig
    Craig says:

    Hi Lacey
    Thanks for spelling out the math in your article. I would like a copy of your spreadsheet to run the numbers on our properties. We go year to year without really knowing how they are performing. Buy and hold is our strategy but that has made it easy to be lazy with the financials!

    • Lacey
      Lacey says:

      Hi Judy, Please fill out this form and you’ll get a link in your email: It’s a double opt-in, so please be sure to check your junk/spam and follow the instructions (we use double opt-in so no one can sign up someone else’s email without their approval – trying to protect our followers) Kind Regards, Lacey

    • Lacey
      Lacey says:

      Hi Tim, there’s a link at the top and bottom of blog to get a downloadable copy. We get a lot of requests so opted for an automated process 🙂 Cheers, Lacey


Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *