Never Sell Your Investment Properties

By on March 21, 2013

The concept of never selling your properties always seem to gain little traction with speculators. Speculators after all only realize their profits from selling.

For a number of people who first set forth to be an investor, the temptation of a quick profit often converts them into a speculator.

It is a good example how the seduction of short term gains can very often make long term benefits look daunting. So attractive is short term gains that often these sellers fail to fully register the impact stamp duties and closing costs have on their investments.

The good thing is that you will never be subject to any fancy closing costs as long as you never sell your property. There is only the annual property tax to worry about.

If the closing costs alone is not a substantial enough reason not to sell, you can add onto that with the loss of rental income and the loss of potential capital gains.

In fact, if we look at it this way, all the income will come to an abrupt stop the moment you sell the property. Is there a more powerful reason not to sell?

There are of course counter arguments on the advantages of selling.

The most valid one is to use the proceeds of the sale to buy a new property. Although this is valid, it fails to fully cut the cake.

There are a few reasons for this. Firstly, there is the horror of stamp duties as mentioned before.

Secondly, in a rising market, you are selling high but buying just as high as well. This effectively resets your gains from the existing property to zero. It can even go negative when closing costs are factored in.

Thirdly, if you require the equity in the current property to buy another property you can do so via refinancing with home equity loans. If you absolutely need maximum equity to make you next purchase, you can take that as a sign that you are stretching your finances too thin.

Short term profits or long term gains?

Short term profits or long term gains?

Rentals and property values are more likely to go up than down in Singapore. If the time has come for you to buy another property, why not own 2 properties instead of just one. You can use an equity loan to fund your next purchase instead of using sales proceeds from selling your existing property. Even explore the viability of creative financing. This way as valuations appreciate, your capital gains double up. Again, if you require the very maximum equity loan to make a new purchase, it is a sign that you are walking on tight rope.

These days, almost anyone who have sold their property in recent years are cursing their luck that they did not hold onto them.

Just take a look at property values now to understand why.

The fact is that if they had held on, their properties would be worth much more. They could have refinanced with an equity loan and get access the the same amount of fund they got from selling their properties previously.

Not to mention they would not have to incur the closing costs associated with the sale.

Putting things into perspective, there might be extreme or even radical reasons that make selling the logical choice for a property owner. It could be a situation where your investments returns are no longer your top priority. In those circumstances, do what you have to do.



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