Sometimes, property investors need a slap across the face with a wet fish. Yup, I just went there because it's like talking to a brick wall sometimes.

It blows my mind that some investors are stubborn about holding on to underperforming assets. Most of the time, it's because the property has some sentimental value, like an old family home. And I get it, those memories were grand, but why jeopardise your future with sentimental bullsh!t. If the numbers don’t make sense anymore, let that birdie fly free and upgrade your life with something new, shiny and rad.

Here is an example of a recent client who is a single mum (Please note I have legacy Property Strategy clients, and I don’t always work exclusively for dads; notwithstanding, there are lessons here that should not be ignored).  

A single mum in her 50s with two grown-up kids, she lives with her elderly parents. Her old 1960s property is worth about $1,600,000, and she owes about $700,000. She cannot afford to hold this property, so she works two jobs, lives rent-free with her elderly folks, and has tenants in the property paying a measly 2% gross yield. She is holding out for more growth despite making serious life-changing sacrifices paying for all the upkeep of an old house in a good area. It’s the never-ending maintenance contract, and the thing has a pool from the 80s… Yikes! The costs just keep piling up. This is what I like to call a severe case of the ‘hold-ons’. She is attached to the memories of her past, and it is killing her future.

She could easily sell the property and pocket 100% of the capital gains without Capital Gains Tax (CGT). That is because she used to live on the property and is eligible for the 6-year CGT exemption. That’s right, even if you have tenanted property for up to 6 years, you can still get the exemption (our preferred accountant can advise on this as part of our Done-For-You, One-To-One Property Strategy Consultation).  

She qualifies for an SDA Dual Key Property Solution up to $1,300,000, assuming she puts most of the change from her existing property in and takes out some borrowings against the SDA property on a standalone security basis. This is easy to do because the new specialist lender on the block takes the potential SDA income into the servicing calculations. The valuations stack up a lot better than traditional mainstream banks, too.

This is what it would look like if she had the backbone to make a good decision and take some chips off the table:

Property Sale = $1,600,000

Less Agent Fees of 2.2% = $35,300

Net proceeds = $1,564,800

Less Mortgage of $700,000

In her pocket = $864,800

CGT = None

This is what it would look like if she upgraded to something seriously rad:

SDA Dual Key Property Solution in Caboolture QLD = $1,293,815

Once fully constructed and tenanted, numbers would look something like this -

She would make about $1,100 per week in positive cash flow, assuming she holds the property in a Family Trust and uses a Bucket Company (again, our preferred bean counter can sort all this out for you and save you a heap of tax).

Do you think it is worth working two jobs to hold on to something going nowhere fast? Do you think she should grit her teeth and bear it for a bit longer for more growth? Or should she replace one of her jobs with passive income and get some life balance back?

What if she gets the timing wrong and needs to sell during the next economic Crisis, when there are no buyers around? Remember, she isn’t living in this property; she lives with her family to save on costs.

Wouldn’t you say an SDA Property Solution is a recession-proof strategy compared to holding and praying for growth with something begging for a renovation and no means to make it happen?

I know exactly what I would do if I were in her situation.

If you have capacity, now is the time to act while SDA Property Solution yields are still attractive.

If you want to build a property portfolio that will supplement your income and perform in any market conditions, consider engaging our team for a One-To-One Property Strategy Consultation. Use the below link to book a free, no-obligation Property Strategy Consultation: