When it comes to investing in property one of the most asked questions is how long should you hold onto an investment property?
For many investors, buy and hold is the most appealing investment strategy available. After all, property is one of the lowest risks of all major investment classes, but you need to be committed for the long term to reap the real benefits.
INVESTING in property can be a delicate balance.
Not only does where and when you buy affect how much profit you can make and how much wealth you can build, but how long you hold onto your investment can also affect your success.
In our experience, when investors don’t achieve their real estate goals, it’s usually because they haven’t held on long enough. If you’re looking for long-term capital growth, holding onto your investment property is the best solution. With the right advice and a trained eye on your cash flow, you can maximise every dollar in your equity to ensure it’s working as hard as it can.
So whats the magical number?
According to CoreLogic’s homes that resold at a loss, the typical length of ownership was 6.1 years for houses and 6.5 years for units.
But for those which sold at a gross profit, the typical length of ownership was recorded at 9.1 years for houses and 7.6 years for units.
These latest results highlight that ownership of property, whether for investment or owner occupier purposes, should be seen as a long-term investment.
So if you’re thinking about investing in property, it’s not for the fair weather punter. You have to think of it as at least a decade-long investment.
So how long should you hold onto your investment property?
There’s no hard and fast rule here, as there are so many factors to consider. But generally speaking, the longer you hold the better growth you will achieve.
As you learn more about the property market, you’ll begin to understand the cycle you have bought into and you’ll recognise the signs when it’s a good time to move in or out.
We have all heard a horror story about people losing big in property. As with any investment, there is a risk and the higher the risk the greater the chance that it can come crashing down. For example, property in mining towns can grow fast in a short period of time and there can be great amounts of profit to be made, but are also volatile. It is important to understand where you are in the cycle and in doing so you need to know when to hold and when to get out. More importantly, you need to understand what level of risk you are comfortable with.
Another aspect that you may need to consider is your strategy. There are many different strategies when it comes to property investing whilst buy and hold may be the preferred investment option, it may not be the best option for you at that point in your investment strategy. Depending on your financial situation and your goals, long term growth may not be the right option for you now. For example, you may want to buy and flip as that may be the best option for you at the time to create short term gains so that you can get where you need to be.
Some experts say never sell, advising property investors to leverage the growth in your property into another investment property. If you purchase good quality property in a high demand location, you will attract healthy rental returns which will enable a lucrative holding period over the long term.
However that is not always the case, and selling may be the option for you. We speak to many investors who have purchased a property and it does not perform as it should have, or their financial situation has changed and the numbers don’t stack up anymore or the property strategy no longer aligns with the phase of their life. It is in these instances that it may be better to sell. But before you do sell, it would be wise to seek professional advice to ensure what may be best for you.
Lastly, a piece of advice.
As the saying goes, “the longer you hold, the luckier you get.” Buying and holding is the least riskier investment strategy. When investing in property, take the time to understand the risk and always seek professional advice.
Talk to our property experts today for our opinion on the right time to sell your property or what options are available to you to create wealth in property.
At RPA, we have been helping everyday Australians become successful in property. Contact us and learn how you can succeed with your financial future in property investment by booking in a Strategy Session to get your life on the right track.
A Strategy Session with RPA is your first simple step to starting your property investment journey.
More than a consultation, your first meeting with an RPA property expert is about discovering how we can meet your real estate investment goals that suit your individual needs.
During the Strategy Session, we can illustrate several general examples of how property investment works and the benefits of working alongside RPA.
When you are ready to take the first step, RPA will facilitate meetings with fully qualified financial brokers, planners and accountants to make the entire process seamless.
Contact us today.