As your life circumstances change, you may need to amend 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 observing a few basic guidelines, you can be well prepared when the time is right to sell your rental property.
Your Property Values Go Up
One key figure to think about 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 see 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 result 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. Some may begin in this way, but then earnings may decline over time. If you are keeping a property that hasn’t been generating an income for a long time, you may feel like selling.
Before you assume that your property isn’t profitable, you need to talk with our Richmond 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 think about selling has nothing to do with the property itself but with other opportunities that appear in your life. Or maybe you’re worn out of owning rental homes and want to try different types of investing. In any event, when opportunities knock, it may mean the time has come to sell your rental. Yet, if you choose to do so, be watchful to determine your tax liability from the sale and consider the most advantageous timing.
You’re Ready to Retire
An additional factor why rental property owners decide 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 are already familiar with, owning rental real estate is a great way to save up for retirement. Investors of all sizes regularly involve at least some property holdings in their retirement planning. If you are planning to retire and need your equity to fund your retirement plans, today might be the time to sell.
You Need Money
Finally, one of the only guarantees about life is that circumstances can and do change. Assume 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 other concerns. For that reason, it may be necessary to sell your rental property. Even though it may seem like you need to sell fast, please be aware that the amount you can get for the property makes sense – especially if you can likely pay for your pressing expenses through another means, such as an education loan. You may later regret underselling your property because you are in a hurry for cash.
If you’re still puzzled about whether the time is right to sell, you may need to ask for some expert advice. At Real Property Management Pacific, we support 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.