In a perfect world, real estate investment properties are long term. Ideally, when you own a rental property, you hold on to it for decades. Your goal is not to rent it out for a year while it’s an exciting new business venture, and then sell it a year later when you’re disenchanted with the managerial tasks of being a landlord. Best case scenario, an investor would purchase an investment property in his or her early thirties and then sell it in his or her late fifties so the seller could live on the profit while collecting on a 401(k) or social security retirement plan. But it’s not always so neat and clean, so cut and dried.
One of the most common and unfortunate turnabouts in real estate investment is when someone gets the idea they’d be great at flipping houses, being a landlord, or otherwise investing in real estate – and then finds out the hard way that they were wrong. It’s better to admit the mistake, cut the losses, and recover than it is to hold on for pride, for fear of failing, or because you’re in so far you just don’t know what else to do. If you thought you were cut out for it, discovered it didn’t suit you and are now in over your head, it’s probably a good time to think about selling.
While it’s a wonderfully responsible action to plan for your future and purchase investment properties that could pay for retirement, there are always unexpected elements to contend with. Unfortunately, rental investment properties are not immune to life’s misfortunes such as divorce, illness, or tragedy. In times of major life change, it may be better to sell.
I Didn’t Ask for This
Although most rental investment properties were carefully made decisions by conscious owners, some people inherit their investment property. Some folks never intended to be landlords, business negotiators, but then found themselves owning a property their parents bought. If you didn’t want the investment property in the first place, you may be happier selling it.
Change in Business Strategy
Some investors buy real estate on a relatively small scale, meaning they own a primary residence and a single investment property. Other investors work with multiple properties. When a property was purchased as part of a business strategy that has since evolved or been eliminated, it may be smart to sell some properties to pay for others.
Another shift in business strategy that would indicate time to sell is when the depreciation benefits of owning an investment property run out so it’s no longer beneficial to hold on to the property.
Capital gains tax is a tax homeowner can pay on profits earned from the sale of the home. There are some tips, tricks, and workarounds for capital gains tax, but when it comes to selling an investment property, its possible you can work with lawyers to arrange profits from that sale be held in an escrow account until applied to another investment property in the future.
Real estate is only worth what a buyer is willing to pay, so the values of houses and condominiums is ever changing. Before deciding to list your investment property for sale, investigate recent market trends to find out how other investment properties in your area are performing on the real estate market. If you have the option, you can wait to list your home until the market trend shifts, but that’s a luxury not all sellers have.
If you can, secure that investment property when you’re young – early thirties, and hold onto that bad boy until just before you can start collecting your retirement benefits or social security. But if you find yourself in a more pressing life condition such as divorce or illness, selling quickly becomes less about the bottom dollar and more about a successful transition from seller to the buyer.
Learn as much as you can before committing to purchase a property you plan to own as an investment property but not live in and be responsible for over the course of the next thirty years.
Your real estate agent is the best source of information about the local community and real estate topics. Give Rachel Tullier a call today at 225-278-7595 to learn more about local areas, discuss selling a house, or tour available homes for sale.