Are you thinking about selling because you need cashflow or a short-term injection of funds?
Have you considered refinancing your investment property?
Sometimes investors can make poor decisions that are not supportive or beneficial to their long-term plan for capital growth and financial security (without looking at other options) when under pressure.
Following is a thought-provoking overview of the pros and cons for selling versus refinancing.
Selling | The Pros
- The immediate benefit of cash from the sale of the property.
- Ability to use the cash and reinvest in property or other investment strategies that are more affordable.
- Reduced personal debt.
Selling | The Cons
- You will most likely have to pay capital gains tax on the capital growth you have achieved between purchasing and selling the property.
- You will pay costs associated with the sale, such as agent commission, advertising, bank and solicitor fees, etc.
- You will no longer be able to purchases additional investment properties with the equity (if applicable) that is available in the property.
Refinancing | The Pros
- Ability to use the capital equity in the property to refinance the purchase of further investments or simply redraw the cash equity to help with cashflow.
- As the rent increases, your serviceability for the loan will improve, allowing you to potentially purchase future properties.
- To achieve a better interest rate.
Refinancing | The Cons
- On-going exposure to interest rate rises resulting with increased debt levels.
- Extra costs associated with refinancing.
It is important to focus on what your goal is and what you want to achieve. If you want to make a quick profit from your investment property, then selling may be the best option. However, if your goal is to build a wealth portfolio then it may be a consideration to look at refinancing.