Selling Investment Property: How to Know When it’s Time
Posted by: John Crow
Date: July 26, 2019
Posted by: John Crow
Date: July 26, 2019
Selling investment property isn’t as clear or easy as you might think. In a perfect world, you would cash out at the right time and ride off into the sunset with a great return on investment, right? Knowing when it’s time to sell can be a hard equation to solve. There are numerous variables to consider during the decision-making process, including:
If any of these scenarios sound like situations you’re currently in, then it’s likely time to sell your rental property.
If you’re putting more money into your investment property than receiving in generated earnings, you’re making a net-negative income. For example, if your rental property is bringing in $1800 a month, but you’re spending $2200 on expenses, then you’re losing $400 a month. Some factors that may produce more negative cash flow include:
If you’re consistently in the red month-by-month, and the annual cost to hold is more than annual appreciation, then it’s time to sell the rental property.
One of the bigger headaches in property management is dealing with maintenance, basic upkeep and repair costs. And depending on if your rental property is located locally or not (more on that below), managing the situation can range from manageable to not-worth-your-time-stressful.
When it comes to keeping a rental property up to modern and in-demand standards, it requires expensive updates every 15 years or so. If you don’t trigger the accelerated depreciation cycle, you’ll be stuck in a cycle where only less desirable tenants who will provide less than desirable care to the property will be willing to rent it. When it comes to managing your investment property income, it’s important to create a capital expense budget in addition to your ongoing maintenance budget; then maintain the property at a higher standard so you can attract a tenant that will do the same, and have cash on hand when it’s time for the major expenses.
If you find yourself unable to spend on updates if you’re constantly needing to repair various items around the property, if your major appliances are within an age of expected failure, then selling your investment would be a good idea.
If your investment property is proximal to your home residence, self managing is less complicated. If you’re living in another city, out of state or in another country then you simply can’t build relationships with tenants, local businesses or repair people, and you won’t have an eye on the investment.
You don’t get as much control when you aren’t local to the area. Managing any issues that arise become timely, and therefore, costly. Under this scenario, hiring a property manager to handle everything and to care for your interests is just good business.
It’s better not to bite off more than you can chew when it comes to real estate investments. With a proper real estate investment strategy developed, combined with a little experience, you can make a lot of money managing multiple rental properties at once. With that said, if you’re inexperienced, or just don’t have the time to manage more than one, it’s best to stick to what you can handle.
So, if you see a greater investment property opportunity in the market, it would be in your best interest to sell your property to help drive the rent up on your next investment.
There’s no better feeling than watching the value on your rental property rise over time. Using simple online resources can help you evaluate and analyze the market your rental property is located in. With that said, it’s important to note that the values listed online may not always be the most accurate or up-to-date. So, reaching out to your local property management company may be in your best interest to help keep you apprised of market values and timing.
If you’re happy with how much your property has appreciated in value, it may be a good time to sell if your property is fully depreciated, or if a 1031 exchange makes sense.
Life’s variables are a great indicator to knowing if you should be using a third-party to help you manage and sell your investment properties. You should consider hiring a property management company if:
With the Century 21 Northwest Property Management team, you can sit back and let experienced property management professionals be hands-on help you.
Need to manage or sell your rental investment property? We will save you time and headaches by taking care of all the essentials when it comes to the management of rentals. Those include:
Contact us to learn more about our rental property management and investment services today.
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