This week’s Steve-ism is:
“If you wouldn’t buy it then maybe it’s time to sell it.”
Selling is the act of closing out your investing position and converting your profit into cash.
Sadly, because many investors are tax-driven, rather than profit driven, they regard selling as a painful experience because it triggers a tax event. Wrong!
“Selling isn’t ancillary to your success, it’s critical to it.”
Watch this video and discover my signals for when it’s time to sell:
Investors who never sell often reach financial fatigue – a phenomenon where they are asset-rich but income poor and are unable to service more debt and hence can no longer grow their property portfolio. This is like having fat cows that refuse to mate, and they produce less and less milk.
Here are three common situations I am asked about:
Situation #1. My property has increased substantially in price. Should I sell it?
Situation #2. My property has not performed like I hoped it might. Should I sell it?
Situation #3. My property has dropped in value. Should I sell it?
Note: If you’re in one of these three situations then I recommend you watch the video above.
“If you wouldn’t buy it then maybe it’s time to sell it” paraphrases one of the tests for whether it is time to sell. That is, if you own a property and wouldn’t buy it again (i.e. believe it would make a good investment at its current market value), then perhaps you should sell it and deploy your capital elsewhere.
If you’re sitting on big capital gains and are afraid to sell because of the tax consequences, let me ask you this: what is driving your decision making – scarcity or abundance? That is, have you become defensive about protecting what you have at the cost of expanding your wealth?
If you’ve had an “A-ha” moment, or have a comment or query to make, then post it below.
Until next time, remember that success comes from doing things differently.
– Steve McKnight
I really like this one Steve. Two key points that stood out to me are:
1. that in the absence of knowing what to do, the majority will do nothing – this is where we need to work on ourselves to not be like the 95%
2. asking yourself the questions “would I buy the property/investment again today at todays price and circumstances” removes a lot of the emotion and pride (not all but a lot). A very good way to checking with yourself and your portfolio.
Hi Peter,
Thanks for sharing your thoughts and contributing to the discussion.
Regards,
– Steve
Thanks for the reminder, Steve! We recently had this aha moment and through discussion with Jason made the decision to sell. Our decision was based on analysis and review of our investing goals, but the 2 simple questions you posed are excellent starting points.
Hi Keith. Thanks for commenting on your application of the Steveism.
When the market booms, people want tomorrow’s price, today.
When the market turns, people want yesterday’s price, today.
The problem is you can only get today’s price, today.
Let those with ears to hear and listen, understand.
Regards,
– Steve
Situation 3# – I’m one of those WA investors. My property has decreased in Value by market estimates to be now worth $300K where as 2yrs ago was $435K. Would I buy it at todays market price, probably yes for a 4x2x2 at $300k a good buy but probably not in the same suburb. But as an already owned investment, is now underperforming significantly. So would I sell, yes if I could but to do anything at present would result in a significant loss and monies still owing to the bank. Guess only option at present is to sit tight and wait for that market to improve back towards positive and chip in…ouch.
What a good piece of advice Steve. I have never had any hesitation selling my assets. As you improve as an investor the property that you have bought yesterday may not be the right one to own today.
In finance terms, you need to make decisions that have the highest expected NPV so if you can pull out your money and reinvest at higher return then it is foolish not to do it. In addition, to grow as an investor one needs to do deals. You don’t gain experience by sitting on one property, you gain experience by doing projects.
I’m in the category of asset rich, income poor. I’ve been struggling with the idea of selling. My properties are doing well both in capital gains and income – but we just built a house that is on the edge of what we can afford. With all that equity, should I just sell something to make life easier? Or keep struggling through until rents and capital gains go up again and cashflow is better? Or is this mostly a lifestyle decision than a financial one?
Hi Steve
Wow ,well said , so simple it makes perfect sense thanks
All the best
Cheers Jase
I have been in this position too and with the help of mentoring by Jason and what I learned in your course made the decision to sell. It worked out well for me releasing cash to complete other projects. It took some encouragment to reach that decision due to my previous strategy of buy and never sell which was maybe the result of listening to bad advice in the past.
Yes I got caught by the buy and never sell motto. Investment wise I think it makes everything one dimensional and I think is dangerous advice taken out of context and not challenged
Another gem from Steve. We are exactly in this situation and want to sell an off-the-plan property. Steve’s simple logic has made the decision to sell simpler and less stressful, despite it being at a financial loss. We are better off redeploying the funds into something that will gain us money now, rather than sitting on something that is unlikely to increase in value for many years to come.
Great Steve-ism Steve! I’m also a supporter of selling to further invest in money-making investments, and your reasoning behind why it should be time to sell is excellent.
Steve, a query if there are multiple properties in play. If one property is currently at a capital loss of $100k and one is at a gain of $220k would it be better to sell the loss property first as far as offsetting capital losses against capital gains?
Be careful that the tax tail doesn’t wag the investing dog.
As a general rule, sell properties that make losses, keep properties that make profits.
:-)
– Steve
Like the analogy Steve but if my cows were trying to mate I would be concerned 😂
I’m currently suffering through situation #2 but not necessarily due to the fundamentals of the property. It’s a gym property bought for $14.5M which had great passive income up until the government shut it down and we haven’t received any income from it for the past year. From what I can see, investors aren’t really scooping up gyms, at least not at the rate they were prior to the pandemic (they were one of the most popular NNN properties).
If we sell, we most certainly would lose money. If we hold on to it, we lose money because the tenant won’t reimburse us for CAM or property tax as per the lease. Very frustrating situation to be in. What to do?