By Ben Hennessy (HENNESSY REAL ESTATE)
This is a question that I often get asked, especially given the transient nature of work in many sectors, particularly the mining sector.
Often families who have only just settled into the community and their newly purchased homes, find themselves digging out the dreaded packing boxes once again.
Whether it’s due to job promotions or transfers, redundancy, new work opportunities or personal reasons taking them off to new horizons, the big move poses the difficult question of should you rent your home out or should you sell it now?
In my experience, the answer to this question depends upon your individual situation.
Do you want to buy in your new location?
Do you need to sell your current home to achieve this?
These questions are pivotal to deciding what to do with your existing residence.
The answer to them often lies in the amount of available equity in your current home that you can access as a deposit for buying in your new location.
One factor to keep in mind is that you can pay hefty lenders mortgage insurance when borrowing more than 80 per cent of the value of your new home.
This in itself can be an attractive drawcard for selling now and accessing all the available equity in your current home to use as a deposit for your new purchase.
Alternatively, if the debt level of your existing home is relatively small then you may easily have enough available equity to borrow against for your next purchase and keep your existing home.
In this instance, there is a strong argument to hold on to your existing residence as an investment property.
We all know the story of the ‘golden goose’ – the magical creature that continued to lay golden eggs for its fortunate owner.
In real estate speak, investment properties can often be that golden goose – they continue to deliver consistent reliable income, year in and year out, which over time pays down the mortgage on your investment property.
Given long enough, you may end up with one, or several, unencumbered investment properties (meaning there is no debt against them).
These investment properties can then be the foundation of your self-funded retirement plan – a flock of golden geese indeed!
For many astute investors, building a real estate investment portfolio of properties delivering solid rental returns is a sure-fire way to long term financial freedom.
The key is to be patient.
As Tony Robbins says, people usually overestimate what can be achieved in a year and under-estimate what can be achieved in a decade!
So try to train yourself into thinking by the decade about your real estate investments rather than by the year.
Real estate is an expensive commodity to trade – a trade on the share market can be as little as $10.
To buy and sell real estate you will usually be paying many thousands of dollars in stamp duty, agents and solicitors fees, bank fees and government taxes.
Worth doing the maths on before rushing into listing your house for sale.
With a mining sector still in full swing, new industries opening up and interest rates remaining at record low levels, there is good reason to expect the current strong market activity to continue for sometime yet.
Our farmers are also looking at some great results from the winter cropping seasons and the cattle market is as strong as it has ever been.
So there is a lot to like about owning an investment property, or any property for that matter, in our region right now!
Another question I am often asked goes along the lines that if we don’t need to sell now, should we rent for 6-12 months and then sell?
In general, properties are usually easier to sell when they are owner occupied rather then sold with tenants in place.
A tenant’s lease on a property is legally binding; meaning tenants are entitled to continue occupying a property until the end of their lease, regardless of changes in ownership.
This can be a disincentive for buyers who wish to get immediate access to the property after the sale if the lease still has several months left to run.
Agents can also only ask for access to a rental property twice per week, potentially restricting the opportunity for multiple buyer inspections throughout the sales campaign.
Owners also have a vested interest in ensuring the property is presented in its best possible light which can further enhance the prospects of a great sale price.
So our usual recommendation under this scenario, is to list the property now while you are still occupying it and keep renting as a Plan B should a great sale result not eventuate.
Selling your family home is always a big decision, and every situation is different.
At Hennessy Real Estate, we appreciate and respect the privilege of sitting down with our clients and helping work through the pros and cons of your individual situation as you grapple with some of life’s momentous decisions and their associated real estate questions.
Helping people through these moments in life is truly one of the great gifts of this career and keeps it even now as rewarding as ever.
See more from Ben:
- Life lessons from real estate
- ‘What do you do for a living?’: Pondering this question’s truth
- The promise of spring nears