Should You Sell or Rent It Out Instead? Weighing Up Rental Yields vs. Capital Gains

Deciding whether to?sell or rent out your property?in Western Australia can be a tough choice, especially in a dynamic market. With?rising property values, rental shortages, and fluctuating interest rates, it’s important to assess which option will best serve your financial goals. Let's break it down.

Understanding the Current WA Property Market

The WA real estate market has seen?strong growth?in recent years, particularly in Perth and key regional areas.

???High Demand for Rentals:?With a tight rental market and low vacancy rates, landlords are achieving?record-high rental yields.

???Capital Growth Opportunities:?Property values have increased in many suburbs, offering potential?strong returns for sellers.

???Interest Rate Considerations:?Rising interest rates affect mortgage repayments and borrowing power, impacting both investors and buyers.

Given these conditions, let's explore whether selling or renting is the better option for you.

Option 1: Selling Your Property

Selling may be the right choice if:

? You want to cash in on capital gains after a period of price growth.

? You no longer want the responsibility of property management.

? You need funds for another investment or personal expenses.

? Your property is in an area with high buyer demand, ensuring a quick sale.

Considerations:

• Selling involves costs such as?agent fees, marketing, capital gains tax (CGT), and settlement fees.
• If the market continues to grow, you might miss out on further price increases.
• You may need to reinvest elsewhere to maintain your financial position.

Option 2: Renting Out Your Property

Renting may be the right choice if:

? You want to benefit from?ongoing passive income?through rental returns.

? Your property is in a high-demand rental area with strong yields.

? You expect further?capital growth?and want to hold onto the asset.

? You’re not ready to sell but want to maintain property ownership.

Considerations:

• Being a landlord comes with?maintenance responsibilities, tenant management, and ongoing costs.
• Property values and rental demand can fluctuate, impacting returns.
• If cash flow is tight, covering mortgage repayments can be a challenge.

Key Financial Metrics: Rental Yield vs. Capital Growth

To make an informed decision, consider these key financial factors:

???Rental Yield:?Annual rental income divided by the property’s value. A?good rental yield in WA is typically between 4-6%.

???Capital Growth:?The increase in property value over time. If growth is strong, holding onto the property may be beneficial.

???Break-Even Analysis:?Compare your mortgage repayments, maintenance costs, and potential rental income to determine if renting is financially viable.

Final Thoughts: What’s Best for You?

The choice between selling or renting depends on your?financial goals, market conditions, and personal circumstances. If you’re unsure, speaking to a local property expert can help clarify your options.

???Contact Alicia McCulloch?at?0459 185 872?or ???book a consultation here?to discuss the best strategy for your property investment.

What are your thoughts? Are you leaning towards selling or renting? Let’s chat in the comments!