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3 Signs That It’s Time to Sell Your Investment Property

Updated: May 23, 2019

Over the years I’ve seen many clients develop a good deal of personal wealth and financial security by investing in residential income property. As these property owners age their goals and motivations often change as well. Here are a few questions you should ask yourself if your real estate investments are no longer feeling like a good fit with your long-term financial plans:

1) Your properties have appreciated considerably: This consideration is quite common in our market. Those owners that purchased during the great recession often find that their equity has more than doubled today. Picture an investment property purchased in 2008 for $200,000 now worth $420,000, would you invest in that same $400,000+ property today? Perhaps you can make more money elsewhere? Others may want to convert their investments to a more passive situation requiring less involvement. Lastly, although I’m not a fear monger the simple fact is that property values go up and down. There is no guarantee that today’s prices will remain stable over time.

2) Significant repairs are needed: I’ll pick on the roof as an example. Of course, the roof must be replaced at some point and it will take some time to re-coup that cost. Unlike other fixtures such as paint and carpeting the landlord is very unlikely to command higher rent because they’re offering a “new” roof. In the end this cost will be directly deducted from the owner’s cash flow. There is no doubt that you’ll take a hit when selling a property that needs work, but you will be saving the time and headache of handling it yourself.

3) It Just doesn’t fit anymore: Owning rental property can be a hassle at times, even with the assistance of a reliable property manager. Aging investors often find themselves burdened with tasks they no longer have the time or patience to complete. Other owners have moved away leaving their investments trailing behind which can be unsettling to say the least. Life is always changing while investment property is a fixed asset, sometimes you simply need to move it.

The big question is for all investors considering the sale of their property is, “What about the tax consequences?” There are several strategies for tax deferment that can be applied to this type of transaction. The 1031 exchange is the most popular vehicle but there are other options too. Start with a trip to your CPA then find a seasoned real estate pro. Together I’m sure you’ll make great decisions.

Feel free to send me a note with any comments or questions:

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