As your life circumstances change, you may need to adapt your ownership status and strategy to make room for new opportunities or prepare for a new stage of life. The good news is that by adopting some important guidelines, you can be fully prepared when the time is right to sell your rental property.
Your Property Values Go Up
One key figure you need to focus on is your property’s long-term rental income potential compared to its current value at sale. This is because as markets heat up, you may find that you could make more in the short term from selling a rental property than you would generate through rental income in the long term.
To find out if this is the scenario, you would need to calculate your return on equity (divide your annual profit in rent by your anticipated equity/cash out at sale). If the final figure is small or negative, it might be time to sell and invest that money back into your real estate portfolio.
Your Property Isn’t Profitable
Not all rental properties are profitable in the long term. Others may turn out this way, but then earnings may decline over time. If you are holding a property that has not been delivering an income for some time, you may feel like selling.
Before you decide that your property isn’t profitable, you need to communicate with our Buhl property managers and ask about a rental assessment. If you’re not getting market value for your current property, you could be leaving dollars at the door.
You Want to Invest in Other Ways
Maybe the reason you think about selling has nothing to do with the property itself but with other opportunities that emerge in your life. Or maybe you are tired of owning rental homes and want to diversify into various types of investing. Despite that, when opportunities knock, it may mean the time has come to sell your rental. However, if you decide to do so, be sure to determine your tax liability from the sale and consider the most advantageous timing.
You’re Ready to Retire
Another reason many rental property owners decide to sell is to finalize retirement plans – even if you are retiring from rental property ownership, not necessarily your career as an investor. As you already know, owning rental real estate is a great way to save up for retirement. Investors of all sizes often include at least some property holdings in their retirement planning. If you are ready to retire and need your equity to fund your retirement plans, the time may be right to sell.
You Need Money
Lastly, one of the few guarantees about life is that things can and do change. Imagine your life changes in such a way that you need money, whether to fund a college education, pay medical expenses, or any of a dozen different reasons. In such circumstances, it may be necessary to sell your rental property. Even though it may appear like you need to sell quickly, don’t forget that the amount you can get for the property makes sense – mainly if you could possibly cover your essential expenses in another method, such as an education loan. You may eventually regret underselling your property because you are in urgent for cash.
If you’re still unclear whether the time is right to sell, it may be imperative to ask for some expert advice. At Real Property Management Magic Valley, we assist rental property owners on all aspects of their investment properties, from finding off-market properties to buy to devising property management strategies that are best for you. To learn more about what we offer, contact us online.