Step #1 – Understand why you want to sell
Before you even think about calling an agent, ask yourself: Why am I selling?
Because that impacts which property you sell first.
At Opes Partners I usually see investors wanting to sell for 6 different scenarios:
Scenario #1 – You have cashflow problems
Mortgage rates went up fast between 2021 and 2024. Many investors felt the pinch.
So the rent from your property might not cover all the costs (that’s where you have to ‘top-up’ the property from your own back pocket).
If your top-ups are getting uncomfortably high, selling a property could relieve the pressure.
Now, you might think: “I’ll just sell the property with the biggest top-up.”
Sometimes that works, but other times it’s not the best financial move.
Let’s say you own:
- Property A: an older Christchurch home. It’s worth $800k, earns $500/week rent (lower yield), has no mortgage, and so no top-up.
- Property B: a newer Hamilton townhouse. It’s worth $700k, earns $700/week rent (higher yield), but has a $650k mortgage, meaning you top up $400/month.
If you sell Property B, you’ll get rid of that $400/month top-up – but you won’t have much equity left after paying back the bank.
If you sell Property A you’ll free up $800k (minus real estate agent fees). You can then use $650k from the sale to pay off the Hamilton property’s mortgage.
That could flip your cashflow from –$400/month to +$400/month.
In this case, selling the equity-rich property without a top-up left you better off. That’s because the property with the top-up had the higher yield.
The reason it needed a top-up was because it had a bigger mortgage.
Don’t just sell the property that looks like the “problem”. Instead, look at your whole portfolio first.
