Whether you are purchasing property on a personal level to raise your family in or as an investor, you will be surprised that you have the same common goal; to get a return in your investment you made when you purchased your property. The trick is to know when to hold on and when to let go. These are the pros and cons of holding onto your property for long.
The pros
Holding onto your property comes with the benefit of being able to improve on your house to sell it at a higher value from what you initially bought it from. CoreLogic recently found that houses that were owned for 9.4 years sold at a profit compared to houses that were only owned for 6.5 years. The same went for units; those owned for 8.2 years sold at a profit while those that were held for 7.0 years were sold at a loss. Some of the other benefits that came with holding onto your property can be:
- A sense of stability. Property can be one of those places where you will be able to make a stable investment if you have put in thorough research. The property market doesn’t fluctuate as drastically as other investment areas.
- Get a return in investment. You can take advantage of the capital growth which can help you benefit from a capital gain when you sell. If you have researched your investment properly and kept a close tab on the property market it can make for a good return on investment.
- Income. You can generate income from it while holding onto it in the form of rental income.
- You can make value-added changes. Taking care of your property can be another investment that you can make to increase the value of your property.
The cons
The art of turning over a profit from your investment also means knowing when to sell and when to continue holding onto it. Holding on for too short or long time can see you lose out on your investment. Australians who held too long onto property experienced a total value loss of $362 million with an average loss of $66,073 in 2016. Not being able to time the sale of your property can also result in it sitting too long on the market, which can cause property owners to sell at a loss. The average property sale in Australia usually takes between 30-120 days. Other cons are:
- The cost of maintenance and repair. The house of maintaining and repairing your house can accumulate over the years. Not having a buffer in place for maintenance can also cut deep. A general rule of thumb is to have at least 1% of your property value stored as a repair and maintenance fund.
- Interest rate rising. Buying a property on a mortgage that does not come with a fixed rate can soon prove to be expensive when the rates increase, affecting your repayments.
- Loss of value. If the value of your property goes down you could end up owing more than what the property is worth which can affect your finances drastically. This is also known as negative equity.