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Rental properties have the potential to provide you with a passive source of income that allows you to save for retirement, fund family vacations or even reduce the amount of time you have to work. Over time, you might grow accustomed to your rental property so much that you miss out on the other opportunities that are out there.
While you should never rush out of or into a real estate investment opportunity, you should continuously reassess your investment to help you determine whether it’s time to sell a rental property and invest your money into something even better.
But first, before you sell a rental property that is currently mortgaged, click the link below for a free strategy call to discuss the potential risks and penalties you may face for breaking your term early.
Questions to ask yourself before you sell a rental property
Every investor is different. What works for one person might not work for another. With that in mind, there’s no single way to determine whether it’s the right time to sell or if you should continue to hold onto your investment property. That being said, there are several questions that you can ask yourself that will help you think critically about your investments and make the right decisions for your portfolio.
Do you have the potential to yield higher returns if you invest your money somewhere else?
There are a lot of real estate opportunities out there. You should never ignore all of these options just because you already own a real estate investment property. It’s a good idea to check local listings and stay up to date on market stats periodically, which can indicate whether it’s a good time to find a new investment.
If you’re not generating enough interest from prospective renters with your current property or you can’t get as much rent revenue as you need to make a good profit, it might be time to move onto something better.
Is it challenging for you to maintain your rental property?
Even if your property is bringing in a reliable source of income and positive cash flow, it might not be worth it if it’s draining your time and energy. If you’re constantly handling repairs, fielding concerns from renters and updating your property to make it suitable for tenants, it might be a good time to sell and invest in something with lower maintenance demands.
If you find that a property is truly going to be too much work, but you do not want to sell a rental property, that may also be a sign that it is time for you to turn around and invest in dedicated property managers. That way the maintenance is no longer your direct responsibility.
Discover How To Buy Unlimited Rental Properties With This Step By Step Guide
Do you need to cash in on your equity?
If you had an unexpected expense or you’ve found a lucrative new investment opportunity, you might need immediate capital to cover the costs. Selling your rental property allows you to cash in on your equity so you can spend your liquid assets however you choose. This is also a good option if you’re preparing for retirement and you want to contribute to your savings with a large sum of money.
But, before you sell a property to cash in on your equity, you need to remember that their are also tools that allow you to draw that equity without selling the property. This means you can enjoy the profits from both appreciation and cash flow from the exact same real estate investment.
Timing a sale
Timing is everything when it comes to selling your rental property. Carefully consider the relevant circumstances and factors that affect the sale of your property, including the state of the real estate market before you decide to make the sale. If the market isn’t in a positive place for property owners, avoid selling unless you have to. Wait until the market is in your favour to ensure you get a fair and reasonable price for your rental.
It’s also important that you take the time necessary to prepare your property for the market. Don’t try to rush through a sale by cutting corners. Instead take all of the steps necessary to ensure you can generate interest from prospective buyers. It might seem like more work than it’s worth to get a rental prepped and ready for sale, but if you can commit your capital elsewhere for a greater return, this is a necessary step. See it less as a chore and more as the path to unlocking liquid capital from an otherwise static investment.
Sell a rental property when the time feels right
There’s no foolproof way to determine when it’s the right time to sell a rental property. The best you can do is to carefully assess your circumstances, consider your goals and take stock of your current investments and potential opportunities elsewhere. By doing these things, you’ll maximize your chance for success and maintain strong investments that help get you where you want to go.
Again, before you sell a rental property that is currently mortgaged, click the link below for a free strategy call to discuss the potential risks and penalties you may face for breaking your term early.