Are you thinking about selling because you need cashflow or a short-term injection of funds?
Have you considered refinancing your investment property?
Sometimes investors can make poor decisions that are not supportive or beneficial to their long-term plan for capital growth and financial security (without looking at other options) when under pressure.
Following is a thought-provoking overview of the pros and cons for selling versus refinancing.
Selling | The Pros
1. The immediate benefit of cash from the sale of the property.
2. Ability to use the cash and reinvest in property or other investment strategies that are more affordable.
3. Reduced personal debt.
Selling | The Cons
1. You will most likely have to pay capital gains tax on the capital growth you have achieved between purchasing and selling the property.
2. You will pay costs associated with the sale, such as agent commission, advertising, bank and solicitor fees, etc.
3. You will no longer be able to purchases additional investment properties with the equity (if applicable) that is available in the property.
Refinancing | The Pros
1. Ability to use the capital equity in the property to refinance the purchase of further investments or simply redraw the cash equity to help with cashflow.
2. As the rent increases, your serviceability for the loan will improve, allowing you to potentially purchase future properties.
3. To achieve a better interest rate.
Refinancing | The Cons
1. On-going exposure to interest rate rises resulting with increased debt levels.
2. Extra costs associated with refinancing.
It is important to focus on what your goal is and what you want to achieve. If you want to make a quick profit from your investment property, then selling may be the best option. However, if your goal is to build a wealth portfolio then it may be a consideration to look at refinancing.