As your life circumstances transform, you may need 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 applying a couple of essential 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 look at is your property’s long-term rental income potential compared to its current value at sale. Reasons for this are that 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 establish if this is the case, 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 total sum 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 earning an income for a long period, you may feel like selling.
Before you say that your property isn’t profitable, you need to communicate with our Round Mountains property managers and inquire 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
Commonly, the reason you think about selling has nothing to do with the property itself but with other opportunities that occur in your life. Or maybe you are done with owning rental homes and want to venture into new types of investing. Either way, when opportunities knock, it may mean the time has come to sell your rental. However, if you decide to do so, remember to determine your tax liability from the sale and consider the most advantageous timing.
You’re Ready to Retire
One more reason many rental property owners decide to sell is to ready retirement plans – even if you are retiring from rental property ownership, not certainly your career as an investor. As you are already aware, owning rental real estate is an excellent method to save up for retirement. Investors of all sizes commonly include at least some property holdings in their retirement planning. If you are eligible for retirement and need your equity to fund your retirement plans, the time may be ideal to sell.
You Need Money
Lastly, one of the few guarantees about life is that things can and do change. If your life changes in such a way that you need money to either fund a college education, pay medical expenses, or any of a dozen different reasons. In that case, it may be advisable to sell your rental property. Even though it may seem like you need to sell immediately, remember that the amount you can get for the property makes sense – largely if you could potentially fund your essential expenses by another method, such as an education loan. You may soon regret underselling your property because you are in urgent need for cash.
If you’re still unclear whether the time is right to sell, it is recommended to ask for some expert advice. At Real Property Management Highland, 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.