People invest in property to strengthen their financial foundations. However, it is possible to make mistakes early in your investing career if you do not have the right team / peer group helping you move forward and helping you educate about property investment. You may not have found the right group of peers for that matter and you may not have read the “right books”; you may have found professionals who are meant to help facilitate robust purchasing decisions, yet you may have ended up with a property or properties that add little value but headache to your bottom line.
Firstly, remember, you made the best decision with the resources you had in the given moment. So stop beating yourself up and start looking at how to remediate your decisions!
What should you do if you HAVE made an unfortunate (learning) investment decision and have ended up with properties with little or no growth? If I was in your shoes I’d ask the following seven questions (and if you are not in these shoes, make note to ensure you do ask these questions before you purchase):
- Is this property costing me money to hold year on year – either due to strata / maintenance etc.? If so, how much?
- Is there a unique factor about the property? If not, how is the value being impacted due to a potential oversupply of similar housing?
- Has there been any capital growth? Or is there potential for capital growth?
- What would be the cash flow when rates increase another 2% or 3%? Will it hurt the bottom line where there has been abysmal capital growth?
- If I continue holding on to this property, what is the opportunity cost around me being able to purchase further properties? (Your mortgage broker should partner with you to answer this question)
- If you are considering selling the property, consider the selling costs and calculate how much net cash you would have once the concerned property is sold?
- If the property was sold, how does it improve your loan servicing? Can you cut your losses now and go and purchase another better quality property? (Another question for your mortgage broker!)
Don’t hold on to an investment you believe isn’t proving to be what you had hoped it would be. This applies to regional properties in particular which tend to offer lower growth. By all means buy if you see potential. However, not making a decision to purchase is better than one to purchase an investment that won’t help you move forward to your financial goals.
As always, get professional advice around finance, legals and taxes before making significant decisions impacting your finances.
All the best with your investing goals!
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