When navigating the real estate market, you may have heard that timing is everything.
This rule applies to residential homes as well as investment properties. However, good timing depends not only on the market but on your property’s condition and your personal goals. When deciding the best time to sell an investment property, it’s important that you look at external market factors as well as internal desires and plans for the future.
Evaluate the Real Estate Market
Owning and managing investment properties can be difficult and time-consuming. Similarly, understanding the investment property market can be overwhelming to property owners without a lot of buying and selling experience. Hiring an experienced broker such as Peter Dodge Bridgehampton can significantly minimize the stress of evaluating the real estate market.
If you’re considering selling a property, but aren’t sure about the best timing, consider engaging with an expert to help guide you through the process.
One strategy you can employ on your own is to browse local real estate listings. Try to find properties that are similar to yours and note the asking prices. Be sure to study these ads carefully and consider touring properties so that you know you’re comparing apples to apples.
Again, an expert can help with this task as he or she may be privy to information regarding the actual sale prices of properties nearby. With this information in hand, you can evaluate whether the market is favorable for selling.
Consider the Property’s Cash Flow
A property’s cash flow can vary greatly from year to year depending on a variety of factors. Profits may be higher some years when maintenance costs are low. Other years might provide less cash flow if you were required to invest significant funds in repairs and upkeep. Keeping detailed records will help you to monitor your property’s long-term return on investment.
Some red flags to watch out for are increasing maintenance costs, frequent vacancies, and rising insurance premiums. If you experience any of these trends over a period of several years, it may be time to re-evaluate your investment. If your building is going to require more maintenance in the coming years than you can expect to earn in rental income, you’re looking at negative cash flow.
Similarly, if your insurance premiums are skyrocketing, you may also find yourself realizing little income. While it’s essential to evaluate these decisions carefully and think long-term, you shouldn’t ignore red flags for long.
Take Stock of Your Personal Goals
When considering whether to sell an investment property, especially one that takes a lot of effort to maintain and manage, you have to consider your personal goals. If you’ve decided that one of your goals is to travel more, you may find that managing your investment property is interfering with that plan. Similarly, if you are considering partial or full retirement, a high-maintenance rental can bog you down and stifle any thoughts of relaxation.
If your property is producing income, you have to weigh the benefits of that income against the costs of ownership and the time it takes to manage. If the income is low but the time investment is high, it may not be worth it for you to keep the property at a time when you are attempting to slow down.
Alternatively, if you foresee yourself working for years into the future and the income is significant, you may feel that the cash flow is worth the effort. Either way, it’s important to take stock of your personal goals and evaluate whether your investment property fits into your long-term plans.
When considering whether to sell an investment property, evaluating the full picture is essential. This picture should include the health of the real estate market in your area, the current and projected cash flow from the investment, and your long and short-term personal life goals. Without taking all of these factors into account, you may not be making the best decision for you.
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