As your life circumstances vary, you might have to change 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 using a couple of easy guidelines, you can be better prepared when the time is right to sell your rental property.
Your Property Values Go Up
One key figure you should watch out for 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 understand if this is the situation, you would have to calculate your return on equity (divide your annual profit in rent by your anticipated equity/cash out at sale). If the resulting number 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 might begin that way, but then earnings may decline over time. If you are holding a property that has not been generating an income for some period, you may feel like selling.
Before you realize that your property isn’t profitable, you need to talk with our Chubbuck 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
Sometimes the reason you consider selling has nothing to do with the property itself but with other opportunities that happen in your life. Or maybe you are burnt out of owning rental homes and want to branch out into different types of investing. Despite everything, when opportunities call, it may mean the time has come to sell your rental. But if you choose to do so, be cautious to determine your tax liability from the sale and consider the most advantageous timing.
You’re Ready to Retire
Another reason several rental property owners choose to sell is to finalize retirement plans – even if you are retiring from rental property ownership, not just your career as an investor. As you definitely understand, owning rental real estate is an incredible way to save up for retirement. Investors of all sizes usually incorporate at least some property holdings in their retirement planning. If you are prepared to retire and need your equity to fund your retirement plans, the time may be right to sell.
You Need Money
Ultimately, one of the main guarantees about life is that things can and do change. Assume your life changes in such a way that you want money, whether to fund a college education, pay medical expenses, or any of a few different things. Therefore, it might be important to sell your rental property. Even if it may feel like you need to sell immediately, remember that the amount you can get for the property makes sense – particularly if you could possibly pay for your urgent expenses in another manner, like an education loan. You may soon regret underselling your property because you are in a rush for cash.
If you’re still unsure whether the time is right to sell, it may be time to ask for some expert advice. At Real Property Management Pocatello, we advise 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.