Sell the bad performer

QI am aged 55 and my wife is 54. We have a joint income of $180,000. Our home (valued at $500,000) is paid off, as is one investment property ($300,000) from which we receive a net income of $8000pa. Another investment property (on the Gold Coast) was bought before the GFC. It is valued at $265,000 and has a mortgage of $265,000, with a current offset account of $30,000. It makes a net loss of $6000. Our combined super is $210,000.

Would it be prudent to:

• Sell the mortgaged investment

property and then to salary sacrifice the $8000 (income from the paid-off investment property) at 15% with a compounded annual growth (currently 8%) of the super plus whatever capital growth there is on the property; or

• Hold onto the mortgaged property

and hope that the price of units on the Gold Coast increases and keep excess funds after living expenses (about $25,000pa) in the offset account; or • Sell both investment properties and put $150,000 into each of our super funds, then both contribute $25,000 a year into super.

Hi, Kevin. To give you an accurate answer, I would need Gold Coast property expertise, which I simply do not have. But I can give you some well-established principles.

Regardless of where you own property, having three in the one area is not likely to be your best strategy. Obviously, I love people owning their own home. A fully paid-off investment property also causes me no problems. You have helped me here by saying that it is performing well, giving you 8%pa, so that sounds like a good one.

The other property seems not to be performing well. So I have to leave it to you to judge whether that will change, but in your shoes I would spread my risk and consider selling the poorperforming property and, as you say, top up your super.

These are only broad principles but to me the idea of holding two properties and then topping up your super meets well-established practice when it comes to investing.