As a Grand Prairie investment property owner, you may spend a lot of energy acquiring and managing your investment property. Any good rental property owner realizes the time will come when they will need to sell the property. While it could be years in the future or sooner than you expect, it tends to be a test to know when that perfect time has shown up.
As your life circumstances change, you might have 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 by using a few 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 should monitor 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 figure out whether this is the situation, you would have to calculate your return on equity (divide your annual profit in rent by your anticipated equity/cash out at sale). If the resulting number 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 might begin that way, but then earnings may decline over time. If you are holding a property that has not been delivering an income for quite a while, you may feel like selling.
Before you declare that your property isn’t profitable, you need to contact our Grand Prairie 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 perhaps you’ve had enough of owning rental homes and want to branch out into different types of investing. Either way, when opportunities present themselves, it may be the time has come to sell your rental. However, if you intend to do so, be sure 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 agree to sell is to complete retirement plans – even if you are retiring from rental property ownership, not necessarily your career as an investor. As you already understand, owning rental real estate is a smart way to save up for retirement. Investors of all sizes usually 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
Ultimately, one of the only guarantees about life is that things can and do change. Assume your life changes in such a way that you need money, either to fund a college education, pay medical expenses, or any of a great many reasons. In that case, it may be necessary to sell your rental property. Even though it may seem like you need to sell quickly, ensure that the amount you can get for the property makes sense – particularly if you could pay for your immediate expenses through another method, such as an education loan. You may come to regret underselling your property because you are in a hurry for cash.
If you’re still not sure whether the time is right to sell, it may be time to ask for some expert advice. At Real Property Management Meridian, we coach 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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