How bad does an investment property need to be to warrant selling it?

Mar 14, 2018

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If you sell a dud investment property, you may have to pay capital gain tax (CGT), selling costs and then stamp duty again when you reinvest… it can be a very expensive exercise! And if you have owned the property for a while, it is probably putting money in your pocket each month (i.e. more than covering its expenses – not costing you anything) and the CGT could be significant – even more reason to not sell it, right?

This is what I would like to investigate in more detail. In particular, how bad does the property’s performance need to be to warrant selling?

A dud investment is any property that hasn't and won't appreciate in value by 7-10% p.a.

There are three costs you need to consider before selling being:

1. Selling costs - agent fees, marketing and maintenance

2. GST - the rule of thumb is to multiple your net gain by 23.5%

3. Re-purchasing costs (stamp duty and buyers' agent fees).

The chart below looks at how much the new property needs to beat the old property by (growth rate) for it to be worthwhile.

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