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If you are involved in property investment or are making plans to become involved, one thing that you need to consider is “When is the best time to sell an investment property?”

High risk oriented speculative investors try to purchase investment properties that they can offload in the short term and get a huge gain. It sounds nice, but it is identified as a high risk strategy for a reason. Recently we heard a magazine investment guru identify the suburb or town in each state likely to get the highest return over the next year. Most of them were regional towns affected by the mining industry. Let’s say they achieve 20% growth over the year. What do you do then? Do you sell? If you do sell, between the purchase costs and selling costs you will have chewed up a good portion of the gain. But if you hang on to it for five years, the mining company may have closed up shop and the property could be worth only a fraction of what you paid for it. So, if you are into property speculation, we cannot really tell you when to sell – we can only wish you good luck.

On the other hand, if you focus on investment properties that are in places where there is likely to be continued high demand forever and a day, then we have something for you to consider. You may not want to ever sell a property until you are well into retirement and you need to do so to provide the liquidity that you need to receive an ongoing, indexed retirement income stream. Taking that approach takes a lot of the pressure off, and with those sorts of properties being much less risky you can sleep better at night.

One of the reasons in property investing for focusing on selling during retirement is tax related. When you sell a property you will pay what is commonly called “capital gains tax.” The tax is actually income tax, but they include half of your capital gain with your other income to work out what your tax is that year. This is generally true if you own the property directly or in a trust, based on current tax law. So, you are going to have to pay tax on half of the capital gain at your marginal tax rate. You would like for the gain to be as large as possible, and for your marginal rate to be as low as possible. When is that likely to be? For most people, it’s sometime during retirement. Naturally this is something you should check with your tax accountant and financial advisor as you work out your retirement plans. With differing circumstances and ever changing tax laws you need to make sure that you get current and specific advice for your situation from a qualified professional.

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If you are contemplating an involvement in property investing, give the friendly credit managers at State Custodians Mortgage Company a call. They are very experienced in providing the finances for such an investment and will be very helpful to you. Call today on 13 72 62.