When to sell: recognising the right time to exit an investment

The best investors know how to buy well – and when to walk away.
Yet most property investors spend hundreds of hours hunting for the right deal and virtually no time planning their exit.

If you don’t have an exit strategy, the market will eventually decide for you – and it won’t be on your terms.

Plan your exit on day one

Smart investors think about the ending before they sign anything — not because they’re pessimistic, but because they’re strategic.
The rule is simple: the best time to plan your exit is the day you buy the property. The second-best time is right now.

Why you need multiple exit options

Markets shift, interest rates vary, and life happens. Consider these scenarios where your original plan might need adjusting:
• Interest rates jump and your cash flow turns negative
• A major infrastructure project is announced near your property
• Council rezoning changes your development potential (hello, PC120)
• Your personal circumstances change: divorce, illness, job loss, or new opportunities
• The market peaks and you want to lock in gains
• A once-in-a-decade deal lands in your inbox

The New Zealand context: what’s changed

The investment landscape has shifted dramatically over the past few years, and the rules you played by in 2021 no longer apply.

The bright-line test was dropped from 10 years to two years in July 2024, fundamentally changing the tax equation. Hold a property for more than two years and any capital gain is tax-free. Sell earlier, and you’re handing a chunk to the IRD.

Now, investors can deduct 100% of mortgage interest from rental income – a complete reversal from recent years when interest deductibility was being phased out. This improvement in cash flow might be enough reason for some investors to hold rather than sell.

Meanwhile, major banks are forecasting house price growth in 2026, with most predictions pointing to a moderate increase after a flat or subdued 2025. Major banks like Westpac and ANZ predict growth around 5–6% for 2026, citing factors such as lower interest rates and an improving economy. We’re in the early recovery phase, which changes the calculus considerably.

Market signals

Watch for these indicators:

Green lights to sell:
• You’ve hit your financial target
• The market is peaking and demand is frothy
• Infrastructure or zoning changes have boosted your property’s value
• You need capital to pursue a better opportunity
• Maintenance costs are climbing and eating into returns
• The neighbourhood is showing signs of decline

Red lights to hold instead:
• You’re approaching the two-year bright-line threshold
• The property is near quality public transport or town centres
• Recent council decisions favour your area (like Auckland’s PC120 focusing density growth on well-connected locations)
• Rental demand is strong and vacancy rates are low
• You’d be selling at the bottom of a cycle
• Your next move isn’t clear

Auckland’s PC120: a case study in timing

Auckland Council’s replacement plan PC120 will create new winners.
Properties within 200 metres of frequent transport routes and near metro centres could be a whole lot more valuable than they were. Flood-prone areas, not so much.

If your property sits in a hazard zone, PC120 could significantly limit future development potential – a potential signal to exit before buyers fully price in the risk.

On the flip side, if you own near Mount Eden, Kingsland, or Morningside stations along the City Rail Link, you might want to hold and watch your property’s development potential grow.

Location has always mattered. It’s about to matter more than ever.

The numbers game: when returns justify exit

Every property should earn its place in your portfolio. If it’s not performing, it’s taking up capital that could work harder elsewhere.

Run the numbers annually:
• What’s your actual return on equity (not just rental yield)?
• Could you redeploy that capital into a better-performing asset?
• Are you holding because of genuine strategy or just inertia?
• What would a rational investor pay for this property today?

Common exit mistakes (and how to avoid them)

#1 Ignoring tax implications
The bright-line test, depreciation recovery, and GST considerations can turn a profitable sale into a mediocre one. Talk to your accountant before you list, not after you’ve signed an unconditional sale agreement.

#2 Emotional attachment
You renovated the bathroom. You picked the paint colours. You remember the day you bought it. None of that matters – properties are assets, not pets.

#3 Waiting for “the perfect time”
Markets don’t ring a bell at the top. If conditions align with your exit criteria and you’ve achieved your goals, that’s your signal. Trying to squeeze out the last 5% often means you miss the exit entirely.

#4 Poor property preparation
Selling a tired property in a stable market is leaving money on the table. The cost of a fresh paint job, garden tidy-up, and minor repairs is tiny compared to the price improvement. If you’re going to sell, sell well.

#5 No backup plan
Your primary exit strategy might be a traditional sale, but what happens if the market stalls? Consider refinancing, rent-to-own arrangements, or holding longer. Markets and life circumstances are unpredictable, so your strategy shouldn’t be rigid.

Your exit toolkit: the main strategies

• Traditional sale: The most straightforward option. Best during seller’s markets when property values are strong and buyer demand is high. Right now, with stock levels high and first-home buyers representing 26% of the market, well-presented properties in good locations are still moving.
• Refinancing: Access equity without selling. Useful when your property has appreciated, but you want to hold for further gains or deploy capital elsewhere. With interest rates falling from recent highs, refinancing is worth considering.
• Hold indefinitely: Pass the property to the next generation. Your heirs receive it at current market value, eliminating capital gains tax from your previous strategies. Set up a trust for property upkeep so inheritance doesn’t become a burden.
• Forced exit: Sometimes the market or your circumstances decide for you. Job loss, relationship breakdown, or unexpected expenses can force a sale at an inopportune time. This is why having equity buffers and contingency plans matters.

Here’s what the numbers tell us about late 2025

Housing affordability in New Zealand is at its most favourable level since pre-Covid. Prices have stabilised, interest rates are declining, and stock levels are high, giving buyers time to make informed decisions.

If you’re thinking about exiting an investment, conditions are surprisingly accommodating. Buyers are active – particularly first-home purchasers – and well-priced properties are selling.

But if your property is well-located, generating solid returns, and you’re not under pressure, holding through this early recovery phase could prove lucrative as the market heats up in 2026.

Thinking about your exit strategy?

Call 0800 GOODWINS to discuss your portfolio and explore your options.