It’s time: Three signs you should sell your investment property

Property is one of the greatest investments for long-term wealth creation and there is no one that argues that point stronger than me!

However, as with any investment, there does come when a time when you need to re-evaluate your position and consider the timings of your options. And that time is now.

Last year I wrote an article about the affordability of housing and its impact on the Australian population. Within this, I detailed how historically we have a tendency to spend between 33% and 55% of our household income on property, giving an indication of the lengths we’re willing to go to in order to own and invest in property.

The current record house prices mixed with record low interest rates should, however, ring alarm bells. It might be a time to consider selling your property investments in order to secure a profit you might not see again for a very long time.  

Remember, I am a long term holder of property and don’t advocate selling if you don’t have to. But there are always exceptions. This is one such time.

So don’t jump onto the phone to the real estate agent just yet. Take a look my signs that can help you assess how the market is performing in your area.

1. When Main Road Properties Sell

Main road properties often leave many people stumped, asking themselves: ‘who would actually live on the side of a busy road like this?’

Think of the Pacific Highway in Sydney, Welshpool Road or the Great Eastern Highway in Perth and Monash Freeway in Melbourne, for example. All busy main roads, all with a smattering of houses dotted along the sides.

Main roads have always been a source of very cheap land. Many people would prefer not to live on a main road and the only encouragement to buy there is because of the cheaper prices.

There’s nothing wrong with that – pragmatic purchases and entry level home buyers always need a platform from which to dive into the market.

But take a minute to think about the last time you drove down one of these roads and consider if there were a lot of ‘sold’ signs outside these houses. Is that the norm? Think about it. Normally there would be a lot of ‘for sale’ signs, and those signs would have been there for a good while – an estate agents little trick to have free branding for a long period of time!

So if you do notice a lot of sold signs next time you drive down these roads, consider why. I’d bet they are the highest they’ve been since 2003 and that should tell you something about your local market and how it’s performing. If properties on main roads are selling, imagine what that means for properties elsewhere?

2. When dog properties sell

There are many properties out there that an investor wouldn’t even consider touching. Buyers agent’s like myself call them dogs.

These normally have bad or non-existent natural light, are in a noisy area (such as close to an airport), have a bad strata management or are located in a less than desirable suburb.

But there are many investors out there that own these types of properties. At the time they might have thought they were snapping up a bargain or perhaps they simply saw potential somewhere within it.

But my advice to you would be to consider looking at how similar ‘dog’ properties are doing in the market? Are they selling? If they are, again – consider why this might be.

Record low interest rates are encouraging people to snap up property left, right and centre so if you think you have one – sell up now!

A little tip: If it’s in a state of disrepair describe it as a renovators delight, this immediately inspires potential buyers and it should fly out of the real estate window!

3. When agents sell their houses

As a buyer’s agent, I often talk with estate agents about the state of the market. But I have never seen so many agents being so open in telling me that even they think the current market is ‘frothy’.

In the last three months I have witnessed 11 agents tell me they’re looking at selling their property, and then have gone and done it. None of those properties are still on the market and they’ve all sold for good prices.

Think about it another way. If there’s one thing estate agents do, it is to preserve their own interests. These agents aren’t waiting for the data to come out to confirm what they already know – they know a good market when they see one and use it to their advantage.

Oh and in case you’re wondering, I too have just sold my Sydney property – and I’ll start looking for a new one soon – when the time is right, but it’s definitely not now.

A final note: My comments targeted above are largely based on the Sydney and Melbourne market in the current climate. Please take note that there are many outer suburbs not yet in this position due to the delayed response of the ripple effect. Brisbane, for example, is well below its eventual peak which I predict will rise in 2015.

Gavin McPherson is CEO of Oasis Property and author of ‘Value Investing in Property: What Would Warren Buffet Do If He Was Buying Property In Australia?’

This story originally appeared at Property Observer.