Investment properties exist for one reason: to make money. Hopefully, your property is increasing in value and your rental income is solid. So why would you sell? There are several reasons that may cause you to liquidate your inventory.
1. The market is topping out
Market factors change year over year. If you’re in an area such as Denver, where home prices have increased year over year and are starting to level, you might want to look at your equity gain. If you can make a nice profit, perhaps it’s time to liquidate. If you sell with a flat fee listing, you could increase that margin 2 to 3 percent vs. commission.
2. The neighborhood is declining
A community showing signs of deterioration may not be the place to stay invested if you can’t hold out for possible gentrification. Likely, that would be years down the road unless you have some knowledge of potential development.
3. Taxes aren’t working in your favor
It may be time to liquidate if you’ve bumped up a tax bracket from rental income, but aren’t seeing enough increase to offset the liability. This is going to require a conversation with an adviser, since capital gains can also impact your finances and taxes.
4. Big repairs are on the horizon
If you’re well informed about your condo and you know a big assessment may be coming for repairs, it may be time to sell before that notice goes out. For single family homes, look out for big repairs like a roof that will need a replacement in a year or so. Of course, you will have to disclose any current issues but if the decrease in price offsets the cash outlay (especially if you don’t have the cash), you may want to go ahead and sell.
5. Other neighborhoods are improving
Keep an eye out for emerging neighborhoods and new developments. It may be a better option to sell your current property for a profit and re-invest in an up-and-coming area. Be willing to look beyond your state.
Realtor.com’s 2017 Housing Forecast ranked 100 metro areas based on price gains and sales growth. The top 10 are Phoenix-Mesa-Scottsdale, AZ; Los Angeles-Long Beach-Anaheim, CA; Boston-Cambridge-Newton, MA/NH; Sacramento-Roseville-Arden-Arcade, CA; Riverside-San Bernardino-Ontario, CA; Jacksonville, FL; Orlando-Kissimmee-Sanford, FL; Raleigh, NC; Tucson, AZ; and Portland-Vancouver-Hillsoboro, OR/WA.
Looking for more affordable options? Go farther down their list for more affordable options with predicted gains over 5 percent (prices via Trulia):
- 18. Provo, UT; median home price $210,000.
- 36. Las Vegas-Henderson-Paradise, NV; median home price (LV) $205,100.
- 58. Greenville-Anderson-Mauldin, SC; median home price (Greenville) $174,950.
- 60. Atlanta-Sandy Springs-Roswell, GA; median home price (Atlanta) $274,450.
6. Personal finances
Perhaps you’ve had a life event (job loss, illness) that’s significantly reduced your income. Sometimes liquidating investments is the only option, and if it’s right for you then it isn’t wrong. Loss of income and the resulting lower tax bracket may work in your favor for capital gains taxes, so talk to your adviser. Listing for a flat fee will put more cash in your pocket.
7. Hassles of being a landlord
Sometimes you just get tired of being a landlord. It can be a hassle to manage your rental and perhaps you’ve had enough. If you lived in your rental two of the past five years, you can sell it and your current primary residence with no capital gains taxes. You could possibly buy a nicer home with a bigger down payment and actually end up paying less per month in mortgage payments.
Whatever your reason for selling your investment property, be sure to list it for a flat fee to save thousands vs. a percentage commission to increase your profit.
BY SUSHA ROBERTS
Redefy Real Estate is a full service brokerage for buyers and sellers, including investors! Increase your profit margin 2 to 3 percent vs. percentage commissions for listings with flat fee, full service.