Property investment tip 47: Why selling your family home could be a mistake

Why selling your family home could be a mistake

When starting a family, many people buy a smaller home due to budget constraints. When the value of this property increases, these buyers sell their property and upgrade to a larger family home.

But is it really a good idea to sell your first family home?

There is no right or wrong answer; it’s a personal choice. However, from a property investment perspective, do not sell your property. Simply remortgage your current home to buy a second property.

Selling your family home could be a mistake

Many people believe it’s better to sell their home. That’s because the profit can be used as a deposit to buy a larger family home, in a better location. But, remember, if your first home has increased in value, other properties in the same area have also increased in value.

People focus too much on the potential profit from selling a property, and how they will become richer. But, they ignore the risk of inflation. Inflation is when the purchasing power of a home buyer decreases because properties prices have increased.

Selling your first property does allow you to upgrade your family home. But, ultimately, you will still own one property. With no rental income and tenants to pay your mortgage, you’ll have to work until the debt is paid off. And worst, capital gains tax must be paid every time you sell a property.

Why you should not sell your family home

Do not sell your first family home, if possible.

Wait for the value to increase, then remortgage and buy a new family home. Your first home then becomes a buy-to-let investment property, rented to tenants.

You can double your investment portfolio quickly if you own multiple properties. That’s because you are not limited to remortgaging one property at a time. And, you don’t pay capital gains tax if you don’t sell.

The disadvantage of not selling your first property is that you might be waiting longer to upgrade your home. This could mean your children will start school in an area that is not your preference.

Some parents feel an urgency to sell and upgrade their home, so their first child can enrol to the ‘best school’.

Personally, I don’t think you need to be educated in the best primary schools to succeed in life. I speak from my own experiences. Investing in your child’s secondary education is more important because experiences in their teenage years will shape their adulthood.

Thus, if money is an issue, it’s better to upgrade your family home when your first child is about to enter secondary school, as opposed to primary school.

So, do you agree that you should not sell your family home?

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Hi, my name is Jude Little, also known as ‘Big Sister Jude’. I am a comic artist and a property investor. I bought my first property at 26 and ended up owning four properties in Australia and the UK by 30. I created this blog to help millions of people, like my little brother and little sister, who want to climb the property ladder but lack the knowledge and confidence on how to get there.

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