As your life circumstances develop, you may need to adjust your ownership status and strategy to make room for new opportunities or prepare for a new stage in life. The good news is that by utilizing a couple of simple 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 should focus your attention on 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 know if this is the case, you will need to calculate your return on equity (divide your annual profit in rent by your anticipated equity/cash out at sale). If the final tally 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 happen that way, but then earnings may decline over time. If you are holding a property that has not been earning an income for some period, you may feel like selling.
Before you declare that your property isn’t profitable, it is important to talk with our Washington 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 materialize in your life. Or maybe you are unhappy with owning rental homes and want to expand into various types of investing. Either way, when opportunities strike, it may signify the time has come to sell your rental. However, if you choose to do so, you should determine your tax liability from the sale and consider the most advantageous timing.
You’re Ready to Retire
Another reason many rental property owners choose to sell is to finalize retirement plans – even if you are retiring from rental property ownership, not necessarily your career as an investor. As you are already aware, owning rental real estate is an excellent option to save up for retirement. Investors of all sizes often include at least some property holdings in their retirement planning. If you are ready to retire and need your equity to fund your retirement plans, the opportunity may be ideal for you to sell.
You Need Money
Lastly, one of the few guarantees about life is that situations can and do change. If your life changes in such a way where you really need money, maybe to fund a college education, pay medical expenses, or any number of other things. For this reason, it may be important to sell your rental property. Although it may seem like you need to sell right away, keep in mind that the amount you can get for the property makes sense – especially if you can afford to pay for your pressing expenses in some other way, such as an education loan. You may regret underselling your property for a while because you are in a hurry to get cash.
If you’re still undecided whether the time is right to sell, it may be time to ask for some expert advice. At Real Property Management Southern Utah, we guide 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.