Ask Paul: Should we sell our investment properties?

Dear Paul,

A lot has happened since you replied to my letter back in 2009 and I would love your opinion on our situation now.

Hubby is now 60 and I'm 55, and we still live in country Victoria on our four-hectare fully owned property (now valued at $750,000).  

We fully own two rentals worth $350,000 each, rented at $320 and $330 a week (purchased in 2012 for $195,000 each, fully paid off in 2021 - they were great for tax when we both worked full-time). 

We bought a new car and used caravan about 10 years ago and enjoy travelling when we can. We spent most of last year on the road enjoying a Queensland winter, which was amazing.

Our son is now 31 and independent, although we have helped him buy some machinery in the past, most of which is repaid now (he does a lot of work for us, so not a priority). 

We are debt free, working part-time and earning a combined $100,000 or so a year, have $150,000 in Ubank and deposit $500 a month for the bonus interest (plus extra when available - in the past 12 months have deposited $46,000 in total.)  Hubby's super is $410,000, mine $105,000.

We would like to start travelling more and working less, but are wondering if selling the rentals and investing the cash would be a smarter option now.

After fees and costs, together they return about $16,000 a year, where interest would potentially return more without the headache of tenants and repairs, etc. Would love to know your thoughts. Thank you. - Karen

I always love hearing from readers who have been in contact in the past and I am very pleased to hear that things have gone so well for you, Karen.

You have built an excellent pool of assets in the 16 years since you wrote to me. I'm not surprised your four-hectare property is such a valuable asset, but delighted you have bought and paid off two investment properties, plus topped up your superannuation. Good job!

Obviously, as you work less, that $100,000 a year will diminish, but that is hardly a problem with the assets you have built up.

While property in most locations has been very good, it is more capital growth than income. I find residential property, after I take a realistic look at maintenance, insurance, agent fees, rates, possibly land tax and strata fees, a pretty poor income-producing asset.

I'd suggest a trip to your tax adviser. It is great you have significant capital gains in the two investment properties, but advice around CGT will be valuable, as would the effectiveness of adding any sale proceeds to super.

Pretty obviously, I'd doubt you would sell them both in the same financial year. Maybe selling one is not a bad starting plan anyway?

My wife and I are also planning the sale of an investment property to move to higher-yield, lower-maintenance assets, such as fixed interest, shares and our super. A real advantage of these investments is not only higher yield, but we can easily access small amounts of capital, which is impossible with property.

Property is still a very valuable part of the wealth-creation process, but less so as we age due to its generally lower income return and inflexibility. There is no point being the richest person in the graveyard.

In another 16 years, with some luck I will be 85. But thanks for contacting me again and I do wish you all the best with your investment decisions.

Frankly, I am not concerned for you. You've made good choices, and you are well diversified and well organised. I think our challenge as we age is health!

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