As a Warminster investment property owner, you could spend a lot of time acquiring and managing your investment property. Every good rental property owner sees the time will come when it will be necessary to sell the property. Even though it may be years in the future or sooner than you think, it can be a test to know when that right time has arrived.
As your life circumstances alter, you may need to adjust your ownership status and strategy to make room for new opportunities or prepare for a new stage of life. The good news is that with some simple guidelines, you can be better prepared when the time is right to sell your rental property.
Your Property Values Go Up
One key figure you must keep your eye 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 find out 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 follow-on figure 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 can start that way, but then earnings may decline over time. If you are holding a property that has not been generating an income for some time, you may feel like selling.
Before you decide that your property isn’t profitable, you should speak with our Warminster 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 occur in your life. Or perhaps you are tired of owning rental homes and want to branch out into different types of investing. One way or another, when opportunities call, it may mean the time has come to sell your rental. However, if you decide to do so, be sensible to 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 settle retirement plans – even if you are retiring from rental property ownership, not necessarily your career as an investor. As you already know, owning rental real estate is a great way 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 time may be right to sell.
You Need Money
Lastly, one of the only guarantees about life is that things can and do change. Suppose 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 things. In that case, it may be necessary to sell your rental property. Even though it may seem like you need to sell fast, be sure that the amount you can get for the property makes sense – especially if you could potentially pay for your pressing expenses in another way, such as an education loan. You may come to regret underselling your property because you are in a rush for cash.
If you’re still unsure whether the time is right to sell, it may be time to ask for some expert advice. At Real Property Management Prosperity, we advise 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.
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