Selling an investment property is a major financial move—one that can either unlock serious capital or trigger unintended tax consequences if not handled strategically. Whether you’re nearing retirement or simply looking to shift your portfolio, understanding the key steps in selling investment property is essential to maximize profit, reduce tax, and streamline the process.
Throughout this article, I’ll walk you through how to prepare, when to sell, tax implications, and what to do with the proceeds, integrating real-world frameworks and tips you won’t find in generic property blogs.
Should You Sell Your Investment Property?
Before jumping into action, start with one essential question: Should you sell your investment property now—or at all?
A common question people ask in their lead-up to retirement is whether they should sell their investment property. The goal is not to guess whether the property market is good, bad, or ugly, but to understand the factors that influence your decision.
“What’s the property worth? What rent do you receive? And what are the expenses?”
From there, I calculate the net rental yield. For example, if you’re earning $550 per week in rent (that’s $28,600 annually), and expenses are $8,000/year, your net rental income is $20,600. Now divide that by a property value of $800,000, and you’re left with a net yield of 2.57%. After taxes (say, 30%), you’re effectively earning 1.8% per year on your capital.
Now compare that with a risk-free return, such as a term deposit. At 1% interest, taxed at 30%, you’re getting 0.7% net. So while property looks slightly better, you still need to ask: Is the extra return worth the hassle, risk, and management?
When Is the Best Time to Sell?
Timing is everything in real estate—and even more so in investment homes. But it’s not just about the property market.
There are three critical timing windows to consider:
Before Retirement
Selling before retiring allows you to:
- Contribute the proceeds to your superannuation, possibly reducing your capital gains tax (CGT)
- Use carry-forward concessional contribution caps to further offset tax
- Simplify your portfolio ahead of retirement
“Selling property before retirement ensures that you can make deductible contributions to super that may offset capital gains tax.”
After Retirement
Waiting to sell until after retirement means:
- You’re likely in a lower tax bracket, which could significantly reduce CGT
- You’re not earning employment income, so the gain is less likely to push you into a higher tax bracket
“Selling an investment property after retiring when you have little or no other taxable income can sometimes be the better option.”
However, by waiting, you might lose the ability to:
- Access unused contribution caps
- Contribute large sums to super if you’re over 67 and don’t meet the work test
Market and Property-Specific Timing
Even with perfect tax planning, don’t ignore:
- Property market cycles
- Rental income sustainability
- Tenant cooperation (or resistance)
- Upcoming capital expenditure needs
Understand the Tax Implications
One of the biggest mistakes sellers make is underestimating the tax bite when selling investment property.
If you’ve owned the property for more than 12 months, you’re entitled to a 50% CGT discount. However, that doesn’t mean your tax bill disappears.
For instance, on a $300,000 gain (split between two owners), each person adds $75,000 to their taxable income. At a 30% marginal rate, that’s $22,500 in tax per person.
“This accessible gain will then be added to their other sources of taxable income and taxed at their marginal tax rate… quite a hefty sum.”
Fortunately, strategies like making concessional super contributions, using carry-forward unused caps, or timing the sale after retirement can reduce that liability.
Selling With Tenants: What You Should Know
If your investment homes are currently tenanted, selling becomes more complex but not impossible.
Here are your options:
- Sell with tenants in place: Keeps the cash flow going and may attract investors.
- Vacate before sale: Allows for renovations, home staging, and broader appeal to owner-occupiers.
Be mindful:
- Tenants must be given proper notice
- Some states offer protections that make eviction prior to sale more difficult
- You may lose 2–4 weeks of rent between tenancy changes
“You might want to remove one or two weeks’ rent per year from the calculation if you want to provide a more realistic yield.”
How to Prepare Your Investment Property for Sale
Presentation matters—especially for investment property for sale that may have been “functional” but not aesthetic.
Here’s what to focus on:
- Repairs & Maintenance: Fix any issues that could raise red flags in building reports
- Cosmetic Updates: New paint, modern lighting, minor landscaping
- Professional Photography: Essential for creating an emotional hook in listings
- Compliance Certificates: Ensure everything is up to code—this builds trust and speeds up closing
And of course, choose the right agent. Someone with experience selling tenanted properties or understanding investors’ motivations is invaluable.
What To Do With the Proceeds
Once sold, the next big decision: What to do with the money?
Option 1: Contribute to Super
This is the most tax-effective route—if you’re eligible.
“Once you make a superannuation definition of retirement and start an income stream, all investment earnings are completely tax-free.”
You’ll want to explore:
- Concessional contributions (up to $27,500/year + unused caps)
- Non-concessional contributions (up to $110,000/year or $330,000 using bring-forward rule)
“Depending on how much the investment property sells for and how much is left over after paying any debt, you might be able to get all of it into super… especially if you’re a member of a couple.”
Option 2: Invest Outside Super
This keeps your funds accessible and allows for:
- Greater flexibility
- Investing in shares, ETFs, term deposits
But it comes at a cost:
- All earnings are taxed at your marginal rate, potentially up to 47%
“With managed funds and shares… you can simply sell small portions each year. But with property, you can’t go and sell the bathroom or the down pipes.”
Liquidity and simplicity win every time in retirement planning.
Diversification, Risk & Emotional Detachment
One last consideration that many overlook: Is your retirement future riding on one single property?
“You’ve worked your whole life and you’re basically crossing your toes and your fingers that this one property does what it’s meant to do.”
Holding an investment property might seem safe, but diversification is essential:
- Bad tenants
- Property crashes
- Regulatory changes
- Pandemics
By unlocking the value now, you can diversify into multiple assets, spread risk, and create a steady, flexible income stream for retirement.
“The decisions that you make now regarding your investment property can really make a difference in relation to the level of income that you need in retirement.”
There’s no one-size-fits-all answer. But by evaluating the return, understanding the tax, planning your contributions to super, and being realistic about property management, you’ll know when and how to act.
If you take away one thing from this, let it be this:
Sell with strategy, not emotion. Plan with clarity, not hope. And don’t leave money on the table by missing timing windows.
