Many landlords enjoy the passive income that comes from renting out their properties. However, there is some risk involved in holding a rental property for too long. So how can you tell when it's time to sell your rental property? There are a few things to consider.
- Look at the real estate market. If it's stagnant or declining, it might be time to sell. On the flip side, if the market is hot, it may also be time to cash out of your current rental and use the proceeds to rebalance your portfolio.
- Consider your own time and effort. If being a landlord is no longer fun or rewarding, it might be time to move on.
- Take a look at your income. If your properties are fully rented but you are not making enough to achieve your goals, it may be time to sell that particular asset and look for a higher-yielding property. (A 1031 Exchange is a tool that can help you accomplish this goal tax-free... contact us to learn how!)
- You love real estate but hate tenants. In that case, there may be different aspects of investing that may be more appealing to you, like fixing and flipping.
- You have a negative cash flow. If it's not a fixable situation, cut the cord.
- You can't keep up on the maintenance. Let's face it, being a landlord is work. You either have to maintain the properties yourself or have enough cash flow to hire someone to handle these tasks for you. If you don't have the money or bandwidth for either, it may be time to sell.
What to Know Before You Sell
If you intend to sell your current rental property and buy another, you may want to consider taking advantage of a 1031 Exchange. It's an IRS rule that allows you to defer the payment of capital gains on the sale of an investment property if you plan to roll the proceeds into a “like-kind” property within a certain period of time. This can equate to huge savings for the investor and can even allow for portfolio growth. If you have questions or would like guidance as you start the process, please contact us at (888) 508-1901 to schedule an appointment.