To sell or not to sell, that is the question!

[freedompath]

We seek the opinions and expeniences from investors who are (or used to live in) overseas but have properties in New Zealand.

Our situation is we are moving overseas in about 6 months time, and deliberating on the pros and cons of (1) selling our house now, or (2) keeping the house and renting it out through property management. (By the way, we bought our house in 2004; although we live in it, we have rented out our 4 spare rooms continuously.)

We are concerned if we sell it now, we will forgo future capital gain, as we believe we are approaching the bottom of the cycle. The advantage we see of selling it now is the opportunities outside of property (to buy more fruitful investment).

Our primary concern for renting it out is the lack of control of expenses for manitenance and repairs. Although we are happy with our chosen property manager, our house is 60 years old. It will inevitably be more repairs and mainteance needed as the years go by.

Our intention to come back to this house (or to New Zealand) has not yet been decided.

Our property will be set up as cashflow positive, tax neutral position, should we hold it.

Words of wisdom will be greatly appreciated.

[Keithw]

I think there are a couple of other things you need to consider as well.

Why did you originally buy an investment property ?
(since you have always rented out part of it, it was obviously not just a house you bought to live in.)
have the underlying reasons for having an investment property really changed ?
My guess would be to make LONG TERM capital gain- this is not a short term thing & you obviously believe there will still be capital gain in the future. So stay with the original plan.

What country are you going to ?
Does it allow you to offset NZ rental losses against your new country's income ?

If you can hold onto a property in NZ for no cost (you said CF +ve /Tax neutral) why would you not just keep it ?
Even If it takes 5 years to get any decent capital gain from it, what are you loosing - nothing but opportunity cost of money/ equity you have in the place.
And if you find some better opportunity to invest in (which I struggle to think of safe ones at present) then you can withdraw some of that equity at that point by borrowing against it- should be tax deductable - depending on your opportunity & how you structure the borrowing, plus what income you will still have here & tax agreements between the countries.

On the face of it I would say there are more reasons to keep the property than to sell up at one of the worst times to sell, get no return on any money in the bank, or worse, loose it in shares !
To me, property is the safest place you can keep your money, its just not liquid.

The maintenance is easily controlled by not letting your property manager spend any more than a few hundred dollars without your permission.

[Green Fish]

I would agree with Keithw that property is a safe place to keep your money. But it's the worst place to keep the bank's money.

[ecoeco]

I'm happy to share my expirence with this. We lived overseas for four years earning essentially no income (volunteer church work). We left four properties with two different managers while we were away.

We updated the maintenace on all properties before leaving.

This was the outcome:
- one property was fine, no problem with income and small mantenance jobs arranged by the property manager. They did a good job.

- the other property manager (who we left with three properties) were terrible. They:
A) failed to notice one set of tenants did not pay rent for 10 weeks over the Christmas period - this caused us terrible trouble as we had to find additional mortgage payments while earning no income. We chose to sell this house from overseas due to a lack of income. This was in 2004 and, while we made a good capital gain it cost us a lot of missed rental income and all the benefits of the 2004 - 2007 market.

B) failed to ensure a property was kept in a reasonable state by the tenants (causing a $20,000 repair bill after the tenants had been in the property for three years). In the end we had to fire them from overseas and ask friends to take over management until we returned.

C) by not selling up we ended up with a lot of equity because of the housing bubble - if we had sold up we would not have been able to easily get back into the market.

So, next time we go we will hire a much more reliable property manager, leave enough cash for substaintial repairs, and arrange to fly home at every 12 - 18 months to conduct an in person inspection.

[freedompath]

Thanks to those who have replied already. Ecoeco - thanks sharing your experiences. Your second property manager and the troubles caused are what our imagination is trying to avoid. With those experiences under your belt, what would you be looking for in a property manager?

Keithw, thanks for your thoughts. We also have considered the refinance option for other investments that we may choose. Unfortunately we don't believe that there is any double tax agreements in the country we are moving too. Just as a side note, Taiwan has no diplomatic tie with New Zealand.

I guess what our core concerns is the maintenance that we haven't thought. Not that our house is poorly maintained, but not being in the country does not allow convincing discussion of alternatives. Have you ever tried to get something done by someone who only thinks inside the sqaure? Ingenuity will all be but lost. As they say necessity is the mother of invention.

Since we moved to New Zealand back in 2004, we have had a rather large learning curve to deal with and experience has taught us so much. We saw on another thread, that houses that are getting on a bit will need some renovation to remain attractive with the newer houses being rented.

Anyway, thank you all for your input, and we look forward to more reponses and experiences.

[spaceman]

Keep it

I'm living overseas and I've kept my original NZ properties and added to them while away.

Property management was a concern when I left ....but other than a few bumps in the road things have gone smoothly enough.

Don't overlook the fact that trips back to NZ can become tax deductable.

Cheers
Spaceman