Hold vs Sell Investment Property
Should you hold or sell your investment property? A 10-year projection comparing rental yield against capital reallocation.
The assumptions
Current property value $650,000. Net rental yield 3.2% after all costs. Capital growth assumption 4% p.a. Alternative investment return 7% p.a. (diversified portfolio). Selling costs 3% of sale price. Capital gains tax at marginal rate with 50% discount.
What the spreadsheet says
Selling and reinvesting in a diversified portfolio produces approximately $85,000 more over 10 years — but this assumes you actually reinvest the proceeds and the alternative return materialises.
What the spreadsheet cannot say
This model cannot capture the emotional attachment to property, the tangibility of bricks and mortar, or the sense of control that direct property ownership provides. It also assumes smooth capital growth — property markets are lumpy and illiquid.
The question
You own an investment property. The rental return is modest. Would you be better off selling and investing the proceeds elsewhere?
What might change the answer
- Capital growth rate — if your property is in a high-growth area, holding may win
- Alternative investment discipline — selling only helps if you actually reinvest wisely
- Tax position — CGT implications vary enormously depending on when you purchased and your marginal rate
- Debt structure — if the property is leveraged, the calculus changes significantly
- Personal factors — proximity to retirement, liquidity needs, estate planning