Owning rental property can be fun and profitable, but there’s much to learn and discover along the way.
It’s not always easy to know when the best time is to sell a rental property. Certainly, the market is a major factor, but there are also other considerations. When you first started out your expectations were likely very different from what they are now. After all, stepping into the role of landlord is definitely not for everyone, but you cannot always gauge that until you experience it for yourself.
Another factor is whether you have the time and patience to fully realize the value of being a rental property owner. It might take 20 years to see the kind of ROI you hoped for starting out. Regardless of all the hindsight, here you are, weighing your options of whether to stay in the game or sell and regroup.
Here’s what we have learned over the years to be some of the most valuable indications of the best time to sell your rental property in order to realize the biggest gain with the least amount of loss.
Reliable Indicators of When to Sell Rental Property
Loss Of Positive Cash Flow
How is your cash flow in your rental property? Is your outflow larger than your inflow? If so, it might be time to sell. If costs of repairs or renovations are forcing you to spend too much on maintenance or keeping the property rented has slowed to a near stop, it might be more valuable for you to sell rather than continue to pour money into the upkeep.
High-Dollar Repairs and Renovation
One of the most common rental property issues is the need for costly repairs. Sometimes, repairs and remodels will serve the positive purpose of attracting top-tier renters, but at the same time, renters might be less likely to feel comfortable if interruptive repairs are needed too often. If your renters leave, you’re left holding the bag for repairs without rental fees to offset the cost.
To help you make an informed decision, follow this easy calculation. Estimate the ROI for your rental property, then subtract your annual operating costs from your annual rental income and divide it by the amount still owed on your mortgage. This calculation can help you decide how to make a decision that’s in your best interest.
An Unstable Real Estate Market
You’re not always faced with negative factors when it comes to knowing the right time to sell. If real estate market conditions increase the value of your property it may be a smart move to sell the property and realize a handsome profit. When housing supply is low and demand is high, that’s an ideal market for you and your potential buyer. Less competition means you can sell at the highest possible price. When the demand for housing is high it means that your buyer should be able to find renters fairly easily, creating a positive scenario for both of you. Other reasons that could increase the value of your rental property enough to make selling a smart move include:
- Low interest rates
- Good mortgage terms
- Positive economic factors
Is It Time for New Investments?
Investing in your first rental property, fixing it up, and finding suitable renters can be a great passive income and may seem exciting for a while. However, if you’ve seen a good ROI and enjoyed the process (including being a landlord), it might indicate you’re ready to move forward and keep growing your investments. If you’re fortunate enough to sell your rental property for a profit, it’s an excellent way to springboard into your next investment with cash in hand, and perhaps an even bigger and better one than the first.
Lucrative rental property investments abound in some areas more than others. North Texas, for instance, continues to be buzzing with rental property opportunities and plenty of top-tier renters as well. Relocations to Texas continue to be very high.
Where to Get Solid Advice
Cousin James Management is a highly respected property management company, serving the North Texas area for more than 29 years. We also work with rental property investors to help market and rent properties to the finest, quality, long-term renters, who will be intently screened to ensure your satisfaction.
With expert, licensed real estate agents on board, Cousin James can advise and offer recommendations on properties throughout North Texas. In the long run, you will save time, reduce stress, and optimize the performance of your real estate investments in more ways than one. Contact us to discuss how we can help you with your property management or rental property.
Meanwhile, feel free to download one of our free checklists. How to Choose a Property Manager, or get the Property Analysis Checklist to guide you in selecting prime properties to add to your portfolio.
Comments are closed.