Decide whether to sell tenanted or vacant
A tenanted property sells into a smaller buyer pool, mostly investors, and often at a lower price if the rent is below market. A vacant unit reaches end users too. But you cannot simply ask a tenant to leave: ending a tenancy to sell is only permitted in specific circumstances, generally where the purchaser intends to occupy it.
- Selling tenanted: smaller pool, no vacancy loss, income continues
- Selling vacant: broader pool, but only lawfully available in defined cases
- A negotiated agreement to end the tenancy is a legitimate route
Capital gains and recapture
Half of the capital gain on an investment property is taxable. If you claimed capital cost allowance over the years, you may also face recapture. Talk to an accountant before the closing date, because the tax year of the sale is what determines the bill.
The mortgage penalty
Breaking a fixed mortgage mid-term triggers an interest rate differential penalty that can be substantial. Options include porting the mortgage to a replacement property, timing the sale to the maturity date, or having the buyer assume the mortgage where the lender permits it.
Get the documentation together first
Leases, rent roll, deposit records, utility history, maintenance records, and any tribunal history. Investor buyers underwrite on documents, and a well-documented property sells faster and at a better price.
Frequently asked questions
- Do I pay tax on the whole gain?
- Half of the capital gain is included in income, plus any recapture of previously claimed depreciation. An accountant should model it before you sell.
- Can I move my mortgage to another property?
- Porting is often possible within a set window and avoids the penalty, subject to requalification.