By Michael Yardney February 27, 2026

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How Do You Know When It’s Time To Sell an Underperforming Investment Property?

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How Do You Know When It’s Time To Sell an Underperforming Investment Property?

Key takeaways

Long-term wealth comes from owning high-quality assets, not frequent trading.

But if a property clearly isn’t compounding wealth—due to poor growth, low rental returns, or weak demand—it may be dragging your portfolio backwards. Investors must accept that sometimes selling is a strategic move, not a failure.

Holding a mediocre property can cost you far more than you realise. Even small underperformance compounded over decades leads to massive lost potential.

The market doesn’t care how long you’ve owned it or what it cost you, only how it performs.

Every investor eventually faces this uncomfortable question: How do I know when it’s time to sell an underperforming investment property?

It’s not an easy decision.

In fact, it’s one of the hardest decisions property investors make because it challenges two powerful human forces - loss aversion and the sunk-cost fallacy.

We hang on because we’re hoping things will get better. We don’t want to admit we made a mistake.

And we worry about tax, timing, and whether we’ll regret letting it go.

But here’s the truth most investors never hear: Sometimes your wealth grows more from what you stop holding than what you keep holding.

Smart, strategic investing isn’t about buying and selling. It’s about owning the right asset for the long term.

But every now and then, even experienced investors end up with a property that simply won’t compound wealth the way they need it to.

So how do you know if you’re holding a dud… or just being impatient?

Let’s break it down the way a seasoned investor should.

Selling Up

Start with the big picture: selling should rarely be the plan

If you’ve been following my thinking over the years, you’ll know I’m a big believer in buying quality assets and holding them through multiple cycles.

Well selected properties rarely require selling.

But the reality is that many investors buy their first or second property before they truly understand the type of asset that outperforms in the long run.

Or perhaps the suburb didn’t evolve as expected. Or maybe zoning changes, oversupply, or local demographic shifts have capped the property’s upside.

If that’s the case, holding onto an underperforming asset can be a massive opportunity cost.

Remember - you only get to hold a limited number of assets during your lifetime. You want every property working hard for you.

The real test: is your property compounding your wealth?

A-grade property does three things consistently:

It grows strongly in value
It attracts rising rents
It remains in constant demand from owner-occupiers

So when assessing whether a property is underperforming, look at these three lenses:

1. Long-term capital growth tracking

Has the property underperformed its suburb or city benchmark for 5 years or more?

One slow year means nothing. Five slow years are a warning sign.

If the gap is consistent, the market is telling you something.

2. Rental growth and tenant demand

Are you struggling with vacancies when the suburb isn't? Have rents flatlined while the rest of the market moved higher?

A healthy property has healthy tenant demand.

3. Demographic and amenity trends

Is the suburb attracting higher-income residents, or is it stagnating?

Have schools, retail, public transport, or lifestyle amenities improved - or gone backwards?

Capital growth follows income growth. If the area isn’t improving, neither will your values.

Opportunity cost - the silent wealth killer

This is the part most investors overlook.

Even a one or two per cent capital growth gap, compounded over 20 or 30 years, becomes hundreds of thousands, even millions of dollars in lost wealth.

Holding a poor property doesn’t just slow your portfolio; it drags the entire thing backwards.

You might be emotionally attached to the property, but the market isn’t.

The numbers don’t care how long you’ve owned it or how hard it’s been to hold.

The clear signs it might be time to sell

Let’s get practical... Here are the genuine red flags that indicate an asset is structurally underperforming, not just experiencing a temporary lull.

1. The property no longer aligns with your strategy

Investors grow. Your goals today may not match the property you bought a decade ago.

2. Weak location fundamentals

These could be:

Oversupplied apartment precincts
Suburbs with low income growth
Regional towns dependent on one industry
Poor transport or limited long-term demand drivers

The problem is that these are structural issues, not solvable problems.

3. Limited owner-occupier appeal

Owner-occupiers drive capital growth. If they don’t want the property, you won’t get the price growth.

4. High and increasing holding costs

If maintenance is constant, insurance is rising faster than average, or tenant quality is deteriorating, something is wrong with the underlying asset.

5. It’s been a full cycle of underperformance

A property that underperforms through an entire cycle isn’t a ‘late bloomer’.
It’s telling you what it is.

Don’t sell for the wrong reasons

In my mind it is just as important to know what not to react to.

Here are some of the wrong reasons to sell your investment property:

Because interest rates went up
Because the media says the market is cooling
Because of a bad tenant experience
Because you’re frustrated or tired of the property

These are emotional responses. And emotional decisions cost investors money.

Fix first, sell second

Before pulling the trigger, ask yourself:

Has the property been poorly managed? Maybe you should change your property manager.
Could strategic renovations improve appeal or rents?
Could a valuation help reset your finance structure?

Sometimes you don’t need to sell. Sometimes you just need better management, better advice, or better execution.

But if you go through this diagnostic process and the fundamentals are still weak - the answer becomes clearer.

If you decide to sell, do it properly

Treat the sale like a strategic wealth move, not a rushed disposal.

Don’t sell during seasonal slow periods
Present the property well - fix repairs, improve appeal
Choose the agent with real buyer depth, not the cheapest commission
And most importantly: redeploy the capital into a high-performing asset quickly

Note: Selling is a tactical step. Repositioning your capital is the strategic win.

Final thoughts

There’s no shame in realising a property isn’t pulling its weight.

The only mistake is holding onto a dud because you’re afraid to admit it.

The right property can change your financial future. The wrong one simply consumes time, money, and opportunity.

If you’re unsure whether your property is underperforming, you don’t need to guess.

A data-backed, strategic review can give you clarity - and sometimes the right decision is to hold.

Sometimes it’s to sell.

The key is knowing the difference.

If you’d like an experienced perspective on whether your property is truly underperforming, consider having a complimentary Wealth Discovery Chat with one of the team at Metropole. There’s no pressure - just clarity.

Because in property, as in life, better decisions lead to better outcomes.

About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.