As your life circumstances adjust, 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 implementing a few effective guidelines, you can be more prepared when the time is right to sell your rental property.
Your Property Values Go Up
One key figure you should observe 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 determine whether 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 amount 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 start that way, but then earnings may decline over time. If you are holding a property that has not been producing an income for some time, you may feel like selling.
Before you conclude that your property isn’t profitable, you should talk with our Ogden 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 arise in your life. Or possibly you are exhausted from owning rental homes and want to open up to different types of investing. In any case, when opportunities call, it may signify the time has come to sell your rental. Nevertheless, if you intend to do so, you must determine your tax liability from the sale and consider the most advantageous timing.
You’re Ready to Retire
Another factor why most rental property owners end up selling is to finish retirement plans – even if you are retiring from rental property ownership, not necessarily your career as an investor. As you probably understand, owning rental real estate is an excellent strategy to save up for retirement. Investors of all sizes usually include 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 timing may be opportune for you to sell.
You Need Money
In conclusion, one of the only guarantees about life is that everything can and does change. Suppose your life changes in such a way that you need money, whether to fund a college education, pay medical expenses, or any other reasons. Because of this, it may be imperative to sell your rental property. Even though it may seem like you need to sell quickly, make sure that the amount you can get for the property makes sense – mostly if you could possibly pay for your necessary expenses in another manner, including an education loan. You may come to regret underselling your property because you are in a hurry for cash.
If you’re still confused about whether the time is right to sell, it may be time to ask for some expert advice. At Real Property Management Northern Utah, we educate 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.