It’s not uncommon to hear landlords speak of the day they’ll eventually sell their rental properties. It’s spoken of as an inevitability, but there are no laws requiring the eventual sale of an investment property. As long as the property is bringing in cash flow, primary or supplemental income; a rental property can support the owner throughout their later years.
However, there are legitimate reasons to sell. But how do you know when the time is right?
Turn a Quick Profit
It’s no secret; the best way to profit in the real estate market is “buy low, sell high”. This strategy is a favorite of real estate investors, who traditionally sell after holding the house a year or less. Rehabbers don’t usually purchase a property with the objective of renting it out. That’s more of a backup plan if the house doesn’t sell in a timely manner. But everyone does business differently; some do plan to keep the property for a longer period, making improvements gradually while collecting rent. After the renovation is complete and the market is favorable, they’ll sell.
How is performance determined? Cash flow. Are you making or losing money each month? To find out, subtract ALL expenses associated with the property (mortgage included) from your rental income. If the difference comes up negative, you may want to consider selling.
However, before making a final decision to sell, see if any adjustments can be made to make the property more profitable. Do your research. Find out the amount similar properties are renting for. If you find you’re charging too little, consider raising the rent as soon as you can and keep the property.
It’s Not Your Cup Of Tea
Although renting property may seem like a good idea, it’s not for everyone. You really should be business minded to a certain degree. Being a landlord isn’t always as “passive” as some make it seem. It can be hard work! Are you up to the challenge of collecting rent, performing maintenance and making repairs?
Some landlords choose to rent to friends or family; which is fine, if emotions can be kept in check. Circumstances like these, don’t always make for the best business decisions. Permitting late rental payments or foregoing intermittent inspections, for instance. But, letting down your guard isn’t without consequences. Unfortunately, the tenants don’t always reciprocate the kindness extended to them. This can be devastating if they are close friends or family members. After a while, landlords may find that the tenants are significantly behind on rent and have damaged the place immeasurably. If you think bringing this up to your loved ones is difficult, imagine having to evict them!
As mentioned earlier, it’s not for everyone (and that’s ok!). If you have found that you’re not well suited for the job it may be time to sell. After all, we choose the investor life, the investor life does not choose us.
It’s a lot easier to manage your own rental properties when you live nearby. This enables landlords to perform inspections, make repairs and collect rent with little to no help. However, you can manage your property from a distance if you have the proper network of resources, including a property local to the rental.
If that’s not your style, you could sell the property and purchase a new rental property closer to where you’ll be living.
Trade It In
Is your rental due for a major overhaul? Now may be a good time to sell. Keep in mind you won’t get top dollar for the property, but that’s the cost you’ll pay for the convenience of not putting any more work (or money) into it.
Maybe you purchased a property at a very low price and are ready to trade up; looking to buy in an area where you can charge higher rent payments.
In either case, it’s ok! One should never feel trapped when it comes to buying or selling their investment properties.
You may have purchased a property without the intention of keeping it long term. Maybe you’re looking to retire, plan your dream wedding or send children to college. Other unfortunate circumstances may move you to consider selling for some much needed money. All of this is understandable, but don’t be hasty.
When our emotions are stirred it can be difficult to make rational decisions. Perhaps talking with a financial advisor will help you stay on the right track and look at the situation more objectively. It might make more sense, for example, to hold the property if it’s a good income stream for you.
In The End
You can feel more secure in your decision to sell a property when you have a good reason. Note that you can sell your rental property at any time, even with tenants in it. Just make sure you are doing so correctly.
Smart Choice Real Estate Solutions is always looking for opportunities to work with landlords, no matter their reason for selling. We make fast, fair cash offers on properties in all conditions and in all price ranges. So if you have a rental you’re looking to sell (commercial or residential), contact us. We look forward to working with you.
Learn more at www.cashforyourrental.com