Investment property to keep or not to keep
I’m trying to decide between keeping an investment property or selling it to reduce financial risk.
Current rough position:
Gross salary: $150.000 approx
PPOR: valued around $900k, loan about $540k.
Investment property: valued around $820k, loan about $386k. It was worth around $465k about two years ago, so it has had a massive run-up. It is now basically break-even from a cash-flow point of view.
If I sell the investment property, I could potentially use the 6-year main residence rule and pay little or no CGT, depending on accountant advice. After repaying the investment loan, I’d have roughly $430k before selling costs/tax.
The idea would be to use the proceeds roughly like this:
\- Pay down PPOR by about $110k
\- Keep around $250k in the PPOR offset
\- Put the remainder into ETFs/cash buffer
That would leave me with around $430k PPOR debt, but only around $180k effectively accruing interest after the offset. It would massively reduce monthly pressure and interest-rate risk.
The reason I’m considering selling is that the investment property has already had a huge gain, and I doubt that kind of growth will repeat in the next few years. I’m also starting a business, so reducing fixed monthly commitments and keeping liquidity could be valuable.
The downside is losing exposure to future capital growth on an $820k property, especially if Perth keeps rising. But since the property is only breaking even, I’m not giving up much monthly income.
Would you keep the investment property and let the tenant keep carrying it, or sell, lock in the gain, reduce PPOR debt, improve cash flow, and rebuild savings/investments from a lower-risk position?
Edit: Male 34yo getting married this year