Everyone has their own opinion as to whether you should buy and sell your property, or if you should buy and hold. Personally, I don’t think you should sell any of your investment properties before you retire unless you really need the money for an emergency.
If possible, only use your personal savings to buy your FIRST investment property. Thereafter, all your future investment properties should be paid mostly by equity or, if necessary, only a small amount from your personal savings.
If you sell your house a few short years after you’ve bought it, you’re not fully benefiting from the long term capital growth to build your equity. That’s why my investment strategy is not to sell.
People often think that it’s logical to sell their first home which they bought on a smaller budget for a larger, more expensive, second home. But what if you need an even larger home to accommodate for your growing family or you want to move to a new location in future?
Though you may have made a huge profit for your first sale, house prices generally increase over the long term. If you keep buying and selling, then its highly likely you can only use the profit you make from one sale on the next purchase because the house prices have increased.
If you keep your property for the long term, for instance 20 to 30 years, the equity growth on one property is likely to increase significantly. Thus, you can use your accumulated equity to buy maybe two, three or more properties over a 20 – 30 year period without having to put a cash deposit with your own savings.
You could, like I have thus far, aim to purchase a new property every couple of years by using the equity you have acquired from the capital growth on your properties. Continue this buying cycle until you have acquired enough investment properties to generate sufficient rental income to live without having to work full time.
How to use the capital growth from one property to pay for multiple properties
Let’s say you do decide to invest in multiple properties. Over the long term the value of all or most of your properties should have increased whilst your mortgage repayments should have decreased.
Instead of working for 30 years to pay off your mortgage(s), my suggestion would be to sell one or two of your existing investment properties, just before you retire, to pay off the mortgages on your other properties.
For example, I own one house and three apartments with my husband. I anticipate that my house will be valued over £1m in 15 years. When I retire, I will sell the house to clear off the mortgages on the three remaining apartments. Then I will use the rental income from each apartment as my retirement income as opposed to relying on my minimal pension / superannuation.
I’ve chosen to sell the house because it is the highest valued property, but you can select any property within your portfolio which best suit your requirements.
For example, you may want to sell your apartment over your house because you plan to retire in your house. The decision is yours but make sure you do the calculation on how much money you will make from selling your property versus how much mortgage debt you might still owe.
WARNING: If you’ve done your calculations and have uncovered that owning multiple properties will put you in financial stress, then stop – don’t proceed. Take a slower investment pace and wait for your financial situation to improve. Property investment should not be a competition.
Please note, though I own a few properties, I am not a legal, financial or professional property expert. I’ve written this post to share my personal experiences and would love to hear your opinions and views.
So, do you prefer the buy and sell investment strategy, or do you prefer to hold your property over the long term?
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