Sell vs Hold Investment Property: Delivered $658K Debt Relief and Fuelled Super and Investment Growth
Background: Meet Robin & Lucy
Robin and Lucy, both Medical professionals, were referred to Yield Financial Planning by their accountant to assist with developing a comprehensive financial strategy. Lucy was preparing to become self-employed, which would lead to a reduction in their household income.
They owned an investment property that had underperformed over the past 11 years and were uncertain whether to hold or sell. Robin was also due to receive a sizable inheritance, and they were seeking guidance on how best to use these funds to strengthen their financial position.
-
Debt Reduction:$658K debt reduction by selling underperforming investment property
-
Inheritance:$250K inheritance used to earn an 8.57% risk-free return
-
Superannuation:Estimated tax saving of $19,754 from super catch-up rule over 4 years
-
Capital Loss:Capital loss of $55,759 from property sale to offset future tax
Why Did They Seek Advice?
- Manage short-term cashflow during Lucy’s transition to self-employment.
- Evaluate options for an underperforming investment property.
- Investment advice around the inheritance.
- Support lifestyle goals, including regular travel
- Strengthen long-term retirement planning and ensure financial security
- Review and align personal insurance coverage with current needs.
Strategies Implemented
As part of our comprehensive review, Yield conducted detailed modelling to assess the financial implications of retaining versus selling their long-held investment property, which had significantly underperformed since its purchase 11 years ago.
Hold the Existing Property:
- Keeping the property in its current underperforming state presented two major drawbacks:
- Opportunity Cost – Their capital remained tied up in an asset that had declined in value, limiting potential returns elsewhere.
- Concentration Risk – The property represented a substantial single-asset exposure in their portfolio. With poor historical performance, this concentrated risk led to the weakest projected financial outcome.
Sell and Reinvest in a New Investment Property:
- This scenario involved selling the current property, using the proceeds to reduce non-deductible debt, and leveraging back into the property market with a new asset.
- While this had the potential for improved growth outcomes, our projections showed that it would delay their ability to retire by approximately three years.
- The increased debt and exposure to property market volatility also added risk.
Sell and Use Proceeds to Repay Debt and Diversify:
- This scenario produced the strongest financial result.
- It enabled immediate debt reduction, improved cashflow, and allowed surplus funds to be redirected toward super contributions and a diversified investment portfolio.
- This approach preserved their original retirement timeline while reducing overall risk and enhancing portfolio resilience.
- Our recommendation was to proceed with the third scenario, which provided the greatest projected after-tax financial benefit, improved liquidity, and better aligned their asset mix with long-term retirement objectives.
- The proceeds from the sale, anticipated to be $658,242 after allowing for 2% in selling costs from an indicative sales price of $671,675, can be used to pay down debt.
- We also noted that selling the property would trigger a capital loss of $55,759, which could be used to offset future capital gains, enhancing their tax position over time.
- As part of our advice, we highlighted that it was still important for Robin and Lucy to note, there are still some disadvantages and risks associated with selling the property. They would forego any future rental income and potential capital growth from the investment property.
- Further, selling the property means they will no longer be providing housing assistance to someone, which the couple have indicated they value.
Maximising Concessional Contributions:
- Lucy will contribute an additional $14,551 in the 2023–24 financial year to reach the $27,500 concessional cap, including her employer's $12,949 SGC.
- Estimated tax saving: $2,837 in the first year.
- Contributions taxed at 15%, significantly lower than Lucy’s marginal tax rate
- Builds retirement savings in a tax-efficient environment.
Catch-Up Concessional Contributions:
- Lucy is eligible to use the catch-up concessional contribution provision, as she has not maximised her concessional caps over the past five years.
- Over the next four years, Lucy can contribute an additional $109,032 into super.
- Estimated cumulative tax savings: $19,754.
- Contributions will further boost retirement savings and reduce overall tax liability.
- However, it’s important to note that these funds would be inaccessible until she reaches the preservation age of 60 and meets a condition of release or until she attains age 65.
Post-Debt Strategy – Non-Concessional Contributions:
- Once their debt is fully offset (estimated by the 2028 financial year), we advised, directing one-third of surplus cashflow to non-concessional super contributions for both Robin and Lucy.
- Leverages the lower tax rate on super investment earnings (max 15%) for better long-term growth than holding funds in cash.
Super Fund Rollover to Managed Discretionary Account (MDA) with Ethical Overlay:
- We recommended rolling over both Robin and Lucy’s super accounts into a fund where we can manage investments through our MDA service with an ethical investment overlay.
- Provides active, professional management of their super aligned with their personal values and ethical considerations.
- Allows for dynamic adjustments based on their goals and economic conditions.
Specific Action for Robin:
- As Robin holds insurance within her current super account, we advised transferring the bulk of funds to the new platform.
- Retaining a minimal balance in her existing super to maintain insurance coverage until new cover is established.
- Ensures continued protection while optimising investment management.
Inheritance Allocation to Offset Debt:
- Lucy is expected to receive a $250,000 inheritance.
- Advised to use the full amount to offset non-deductible home loan debt, given interest rates are likely to exceed 6%.
- This strategy provides a risk-free, pre-tax equivalent return of 8.57%, making it more effective than investing the funds in higher-risk assets.
Post-Debt Investment Plan :
- Once their home loan is fully offset (expected by 2028, potentially after selling their underperforming investment property).
- One-third of their annual surplus cashflow will be invested in a diversified managed investment portfolio in joint names.
- This approach targets higher returns than cash, builds liquid, flexible assets for early retirement, and takes advantage of lower retirement tax rates.
Retention and Future Sale of Shares:
- Robin will retain her existing shares in a major Australian company, which represent 7.5% of her assets and have significant unrealised capital gains.
- Selling now would result in a high capital gains tax, as she is currently in the top tax bracket.
- Suggested to consider selling post-retirement, when her income is lower, to reduce tax and allow for greater diversification.
Outcomes and Benefits
- Positioned to retire on their original timeline (Robin at age 60, Lucy at age 62), with increased financial confidence and flexibility.
- Strategy changes enabled up to $136,032 in additional super contributions, with a combined estimated tax saving of $22,591.
- The recommended sale of their investment property is projected to result in a net improvement in after-tax wealth, along with a capital loss of $55,759 to offset future gains.
- Super rollover to an ethical MDA has improved investment diversification and alignment with personal values.
- Inheritance and debt strategies deliver a risk-free return equivalent to 8.57%, with significant interest savings and accelerated wealth building.
Key Takeaway
Robin and Lucy’s story highlights how personalised financial advice can transform uncertainty into clarity and control. Every financial journey is different, and like Robin and Lucy, you deserve advice that reflects your priorities, whether that's preparing for self-employment, building a sustainable retirement, or aligning your investments with your values.
Life is Full of Possibilities
Book your free consultation with a Yield Advisor.
Fantastic experience with this professional service offering and the people over many years. It is a personal approach with a sensitive tone to your entire life in mind. It doesn’t feel transactional and well worth your investment in time and money. Highly recommend the team.
Demi Papadoiliopoulos
Book NowMeet the Experts Behind the Strategy
Important Note
Produced with our client’s permission. Names within this case study have been changed to protect the client’s right to privacy. The content of this case study has been based on a real-life client. Any information provided here is general advice only and does not consider your objectives, financial situation or needs. This information should not be taken as comprehensive and does not constitute legal or financial advice. You should seek legal, financial or other professional advice before relying on any content. Yield Financial Planning is not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published.
You May Also Like
James McFall, CFP® 
August 17, 2025 
James McFall, CFP® October 13, 2023 
James McFall, CFP® August 10, 2023 
