At this point, 2020 looks like it just might be an unprofitable year for rental properties with all the taxes property owners have to face.
This is not good news because investing in rental properties is about maximizing profits and enjoying passive income. However, it comes to a time when you start incurring losses or facing risks that make it a better idea to sell the property.
Selling a rental property is a major decision though, so how do you know when the right time comes to sell?
For obvious reasons, you may still feel that selling your rental home would be a bad idea because you may not have had those intentions when you initially invested in it. To make the decisions easier for you, we’ll give you all the clear signs that it’s the right time to sell your rental property in Orange County.
The Property is Worth a Lot More Than You Bought it For
As far as real estate goes, there is always a chance that the property will appreciate in value, giving you an opportunity to make a profit out of it. If, after valuing your property, you find that it’s more valuable than it was before, selling might be a better idea than renting it.
Maybe the neighborhood thrived after you bought the property, and you’re finally ready to make a profit. This is a major sign that it is the right time to sell your rental real estate.
You’re Making Losses
There’s nothing worse than having a rental property that lacks a positive cash flow. There are various reasons why your rental property cash flow could be dwindling, like taxes, insurance, and utilities. The market rents may have also dropped, prompting you to lower your rental charges or promoting some of your tenants to move to cheaper places.
Chances are, you became a landlord for the sheer reason of making money. However, if it’s gotten to the point where you’re losing money instead of reaping benefits, it’s a clear sign that selling the rental property is a better idea.
If you didn’t already own your rental property, would you consider purchasing it right now? Take a look at it, value it, and decide whether you would invest in it and if you wouldn’t, then it a good time to sell it.
You Want to Move on to Other Things
You may have planned to keep the property for a long time, but life always takes different turns than what we expect. If, with time, your life, goals, and needs have changed, and you want to move on, then selling your rental home is a good idea. Maybe you have found another opportunity in a different state or country, or maybe you just want a change in scenery.
Regardless of the reason why you’re changing your life, selling your rental home can save you a lot of stress. Of course, this might also have been a short term goal that you would keep until another major goal happens. If you have achieved that goal, then you have no reason to hold onto the property, and you can put it on the market.
You’re Having a Hard Time Maintaining It
Selling a rental property is a good idea when you can no longer afford maintenance or simply don’t have the time to do it yourself. Managing and maintaining a rental property is a significant part of being a landlord, because you will constantly need to do repairs and other routines.
The rental home needs to be habitable and comfortable for your tenants, and you must ensure it is up to par with the laws and regulations of your area.
By this point, you know that owning a rental home and being a landlord requires both time and money. Some repairs will happen unexpectedly, like plumbing issues, and they can catch you off guard. The expenses involved and the trouble of finding reputable contractors every time something happens maybe too much for you.
You Can’t Take Being a Landlord
Most people don’t realize the stress that comes with being a landlord until they experience it firsthand. Managing property and tenants is not as easy as receiving rent every month. Some tenants might refuse to pay rent on time.
Others could be into drugs, and you constantly get police trouble. You should be ready to take calls anytime as well, because emergencies could happen in the middle of the night.
If you find all these things draining because what you initially thought was a part-time job has turned out to be full-time, selling your rental home could be in your best interest.
You Want to Invest in a Different Niche
The secret to successful investing is diversification. You could feel like it’s time to diversify and take your investments in a different direction. If you have major plans and need the capital for more valuable property, it’s a good idea to sell your rental home and use the proceeds to hit your goal.
When assets take up more than 50% of your investment portfolio, it’s about time you rethink and rebalance. You could sell the property and invest in something else entirely and expand to other entities. Real estate is not the only way to generate passive income, as you can choose anything else from dividends to REITs, bonds, and CDs.
You Need Capital
There are many reasons why you might need the money and selling your rental home could be the best option. For instance, you may need to put up a business that will potentially make you more money.
You may also be facing a health crisis that requires a lot of money to manage or celebrating a marriage and having children. If you have a life-changing event that brings about a need for money, consider selling your rental home to get it.
Selling a Rental Property: Signs That it’s Time to Do It
Selling a rental property can feel like a bad idea, for many reasons. You may still want to hold on to it because it has a positive cash flow, but if your need for capital is greater, then selling it will be a good idea. You can always purchase another real estate property once your venture thrives.
If selling is not appealing, and you want to escape the trouble of dealing with tenants, a property management company can swoop in and save you. Please get in touch with us, and we’ll discuss how we can help you manage your properties.