The Best Time to Sell Your Investment Property

Most people who buy and manage investment properties hold them for a long time, capitalizing on rental income and property appreciation simultaneously. But eventually, you may reach a point when you want to sell an investment property.

When is the best time to sell that investment property? And how do you know this is the right move?

Getting Expert Advice

If you don’t have much real estate investing experience, your best bet is to get expert advice on the matter. If you have a property management team, They can help you evaluate your income and expenses, the state of the local market, and other factors that you’ll need to weigh in your decision. They may even be willing to give you advice on whether it makes sense to sell your property or not.

Alternatively, you can also talk to a real estate agent, other real estate investors, or anyone else who may have the expertise to help you.

Motivations for Selling an Investment Property

There are many reasonable motivations for wanting to sell an investment property, including:

•       You’re operating at a loss. One possibility is that you’re currently operating at a loss. This often happens with properties that demand lots of repairs and upkeep, and with properties in relatively low income neighborhoods. If you’re currently spending more money than you’re making on a property, it only makes sense that you should try and sell it to prevent further losses. The only other reasonable alternative is to try to make changes to the property so that it can operate more profitably, but this isn’t always possible or easy.
•       You’re barely breaking even. Another possibility is that you’re barely breaking even. Breaking even isn’t necessarily a bad thing in real estate investing; sometimes, it can be a very profitable long-term play. However, it’s important to analyze the reasons why you’re breaking even and try to address them before selling the property outright. You might be able to tip the equation in your favor, and you might be able to continue holding the property so that you’re profitable in the long run.
•       You think another property would be more profitable. Unsurprisingly, some rental properties are more profitable than others. If you believe that there is a similar property in the area, or a property in a totally different area that could make more money, it might be prudent to sell the struggling property so you can have the cash to buy a better one. Just keep in mind that just because a property looks profitable doesn’t mean it will be; you’ll need to be careful in your due diligence if you want to make sure this maneuver ends in your favor.
•       You think the market has reached a peak. Some real estate investors sell rental properties when they believe the market has reached a peak. In other words, if you believe prices are as high as they’re going to get, it might make sense to sell the property and reap the profits. The downside of this is you’ll miss out on future rental income, but you can always buy another property when prices go back down.
•       You need to rebalance your portfolio. Intelligent investors understand that they need to occasionally rebalance their portfolios, shifting assets around so they can see a more favorable return and more stable, balanced gains. If you feel like you’re overexposed to real estate, or if you need exposure to other investment areas, it might make sense to sell your property.

The Problem With Timing the Market

Timing the real estate market is technically possible, but incredibly hard to pull off. If you’re interested in selling your property because you believe the market is at its peak and is about to decline, make sure you fully understand the unpredictable dynamics of real estate market fluctuations. At the very least, you should only pursue this maneuver if you would be comfortable if the market continues to rise.

Tips for Timing Your Sale Appropriately

These are some of the most important tips for timing your sale appropriately:

•       Know your motivation. Make sure you know exactly why you want to sell.
•       Weigh all the factors. Consider a wide range of factors, including sale price, income, and future potential.
•       Get expert insights. Always talk to a handful of experts before making a major decision like this, so you can get their perspective and opinion on the matter.
•       Crunch the numbers. Try to keep your decision as objective as possible by calculating each possibility.
•       Think both short-term and long-term. Short-term solutions don’t always pay off in the long term, so consider both the immediate and distant time horizons.

There are several good times to sell your investment property, but it’s not always easy or straightforward to figure out when they are. Work closely with experts and do your due diligence to maximize your chances of success in this area.