SHOULD I SELL?

"Should I sell?"

Clients keep asking me this. My usual reply is a question of my own: "And then what?"

The answer matters, because selling now comes at a cost. In today's soft market, some buyers are negotiating as much as 20% off asking prices.

If you need the cash, that can be a fair trade. Liquidity is a valid reason to sell.

But some owners tell me they'd park the money in a time deposit, earn interest, and buy back once prices drop. That's trying to time the market. It's hard to get right once, and this plan needs you to get it right twice.

Walk through it. Take a unit listed at P10 million. At 20% off, it sells for P8 million. Capital gains tax and broker's fees take close to 10% of that, leaving you about P7.2 million, or P2.8 million less than the number in your head. That goes into a time deposit, where interest is taxed at 20%. When rates come down, your deposit renews at a lower rate. Financial managers call this reinvestment risk.

Then comes the second decision: when to buy back. The hope is that prices crater and you pick up a unit at the bottom. But the bottom is only obvious in hindsight. You won't be the only one waiting, and when prices look attractive, you'll be competing with every buyer who had the same plan. Believe me, there are plenty. That bottom may never come.

Others plan to put the money into a business. That swaps a property risk you understand for an operating risk you may not. It can pay off, but it's a bet on growth, not preservation.

Holding isn't free either. Association dues, real property tax, maintenance and vacancies all add up, so an empty unit deserves a hard look.

Besides needing the cash, there's one other good reason to sell: you own too much property. If most of your net worth is tied up in real estate, selling a unit to diversify into other assets may make sense, whatever the market is doing.

Holding through a soft market and rebalancing when you're overexposed won't make you rich, and they aren't meant to. They protect the wealth you've already built. William Green's Richer, Wiser, Happier makes the point well: rather than trying to be the richest guy in the room, aim to be the last man standing.