Wednesday, November 28, 2012

The $1million questions: SELL, BUY OR RENT?

The $1million questions: SELL, BUY OR RENT?

Pretty much every day someone will ask...“Do I sell now, buy now, or rent?” or “Will the market improve next year?”

The depends.  Although there are generational opportunities right now for those who know what they’re doing.

The 6 most common buyer/seller scenarios:

1) Selling (and not buying):

Being completely out of the market is risky. If the market suddenly kicks you can be left behind financially. There would however be very few “in the know” that see this as a risk in the next couple of years. Your decision will depend on your level of optimism for a turnaround.

2) Selling and Buying (downsizing):

Downsizing is best done in a boom market, but remains a relatively neutral move, irrespective of market conditions. Selling your high value property for a discounted amount forgoes potential tax free capital gain. Your new property will also substantially increase in value.

3) Selling and Buying (upsizing):

Upsizing is best done in a recessionary tough market – and the tougher the better. You will be well in front upsizing in this market. Save on costs, better choice of property and lower cost changeover. Capital gains are not paid on your principal place of residence, so the bigger and better the home, the more tax free capital gain you get. Absolute dollars in your pocket!

4) Buying additional property/investments:

Buy when everyone else needs to sell - better choice, better conditions and savings will be significant (or the quality of the property will be superior). Savings on fees and property purchase price all increase your rate of rental return.

5) Not Selling (no longer moving):

This is a common decision if you are unhappy with the price buyers are willing to pay for your property. You risk the loss of your marketing investment, and beware that any future capital appreciation will be from the price that you would have sold for - NOT from your current expectations. When the new cycle begins, remember - all other properties will have also moved in price! Your best option (assuming you are financially able) would be to buy the next house at today's lower prices and rent it pending your future move.

6) Moving but not Selling and not Buying:

RENTING YOUR PRECIOUS HOME...BEWARE! If you are delaying the sale of your much loved family home and decide to rent it rather than meet the market, be aware that even the very best tenants are not going to treat the home as you have. After all, they are paying you good money for the accommodation. Your home, once rented, makes you a small business operator. Factor in wear and tear, realise it will no longer be your "private home" and be wary of possible capital gains tax issues.

To minimise risk and optimise your potential, be sure you have it professionally managed. Invest in great management; it will be the best protection you can offer your investment while you wait for the next property cycle.

In many cases, these are literally $1million questions…be sure to do your homework before making any of the above decisions!

I hope this helps....

Anthony Toop

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