By Cam McLellan
A while ago Al and I did a WOD about me selling my primary place of residence. Since then I’ve been knocked around by about 30 emails asking me why I didn’t just rent it out.
Just because your home is a great house where you’ve raised your family and been really happy and comfortable doesn’t mean it will make a great investment. The new tenants might love it as much as you did but a tenant liking a property, isn’t what makes it a great investment property either. This decision should be based purely on numbers, rather than an emotional decision.
We could have held on to the place and drawn equity out but the reality was because of where it was located, it would of only achieved $600 a week in rent. So instead, for the $2,200,000 we got for the place, I can go out and buy four or five investment properties and get about $2000 in rent.
So it comes down to yield and holding the same the same amount of asset for less money out of my back pocket. Yes, it was a beautiful home but the reality was, it would get crap rent.
Also, when you sell your own house, you don’t pay any tax. So if I started renting out the house and then decided in five years it was a really bad investment, I would have to pay tax from the time I moved out to the time I sold it.
People think blue chip properties are a fantastic investment because their value might go up a little bit higher. If it goes up 1 per cent more but it’s costing me $1,000 per month out of my back pocket, it’s not worth it. I want a nice easy portfolio.
Investing should be about giving you a good life, not skimping and saving trying to buy blue chip properties. It’s about holding as much property as you can for as little of your own money each month as possible.