Ask Paul: Is it ok to sell an investment property we can't afford?

Dear Paul,

My wife and I bought an investment property a couple of years ago, hoping that our young daughter might be able to move into it when she finishes school.

But the rent doesn't come close to covering the mortgage, and our other costs are spiralling out of control. Should we hang onto it at all costs, or is it okay to recognise that things haven't gone to plan and sell the second property so we can sleep at night? - Rocky

A challenging question, Rocky. Technically, there is little doubt that holding well-located property in the long term is a winner.

Inflation plus a growing population will, over the decades, see property continue its role as a store of wealth. Inflation also destroys the real value of a loan. But the issue is, what sacrifices do you need to make to keep both properties?

The first sacrifice is your cashflow. You could really cut your costs, buy food in bulk, sell a car, take no holidays and even consider a bit of weekend or night work.

History tells us that those who hold quality property over the long term do well. What is the cost to you both personally, though?

The second sacrifice you have already mentioned: the negative role of stress.

I have a very simple rule when it comes to money. If you are losing sleep at night, I think technical principles go out the window and you choose the quality of your life over greater long-term wealth.

Frankly, Rocky, I can only give you a framework in which to make a decision about retaining or selling your investment property.

You and your wife need to put all the facts on the table - everything from your budget, your career security and ability to be paid more to a possible inheritance. You need to look at budget cuts and possibly painful choices. You need to discuss stress and your sleep.

Once you do this, and you may need a glass or two of wine, I think your answer will be in front of you.

Make sure you put quality of life on the table. I can tell you one thing for sure: there will be many more opportunities to secure your daughter's future. So, let's worry about you and your wife right now.

Money stress is destructive to individuals, couples and relationships. Your physical and mental health always comes before money.

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