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After spending years building a nine-property portfolio, investor Kevin Sum recently decided to sell off two of his real estate assets. How did he know it was time to sell these properties?
One of the properties he sold was a two-bedroom unit in Sydney”, which he bought in 2009. Eight years ago, he paid $258,000 for the property. In 2018, it was sold for $475,000., a “vibrant area at the centre of
According to Kevin: “[I’m pretty happy with it]… I lived in it for a while [until] I started renting it out... in 2010.”
“I was getting... $350 rent from day one… [so], at least, I know that I’m positively geared and I don’t have to worry at night thinking what happens if I lose my job or something bad happens to me,” he added.
The other asset he sold was a “regional rural” house in Orange, which he bought for around $145,000 between 2011 and 2012. The buyers paid $180,000 for it last year.
Even considering the holding costs for five years — mortgage, stamp duty, lender’s mortgage insurance, agent’s fees and more — Kevin believes that he earned a fair amount of money through the sale of the Orange property.
The property investor said: “It [didn’t] really cost me much to actually hold. I was getting 200-odd dollars every week in rent and the good thing was I actually revalued my place and I got equity out.
“Back then, I didn’t have much money, so that enabled me to purchase other properties from that.”
Kevin’s experience in offloading investment properties from his portfolio proved that selling assets is more than realising the value of a property — it also entails factoring in the holding costs you had to shoulder over the years and preparing for the cost associated with the sale.
Choosing which properties to sell
Out of his nine properties, Kevin decided to sell the Granville unit and the Orange house because he believes that they have already “reached their peak” in terms of wealth-creation potential.
According to him: “I was thinking… I can keep it there and, maybe, in another five years’ time, it might go up by… $50,000 for Granville and... [around] $30,000 for Orange.
“But why don’t I realise the cash, free up some of my money and... my borrowing capacity to buy something [for a] similar amount of money... but will make me more money or... will go up more in value?”
At the end of the day, for smart property investors, it’s all about “the utility of the money”, Smart Property Investment’s Phil Tarrant said. Even when deciding which property to purchase, it’s important to choose the asset that will provide a better use of your money.
Kevin’s advice for budding property investors is: Try to avoid looking at the big picture all the time. Property investment may be deemed as a long-term game, but most of the time, you have a choice between waiting for “slow, organic growth” and seeking opportunities for better growth.
In his case, Kevin decided that, after seeing huge growth in his properties since 2009, it’s time to find better wealth-creation opportunities as the market stabilises.
He said: “For example, with the Granville one, I might be able to buy two in Brisbane… [which may] go up by, say, $150,000 in total.”
“[If I keep the] Granville one, I only predict, say, $50,000 worth of growth, so why not offload Granville… and put [investment] in… Brisbane or wherever, which might potentially give me more than $50,000?” the property investor added.
Phil concluded: “[This strategy will also give you] greater diversification because you can have two properties in different markets — it’s a good strategy.”
Tune in to Kevin Sum’s episode on The Smart Property Investment Show to know more about the right time to haggle commission with your real estate agent, as well as the boxes your property should be ticking and the opportunities you should be jumping on.
An investment is an asset or item purchased with the expectation that it will generate income or appreciate in value in the future.
Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.