Deciding on Selling an investment property

Many investors question on how long to hold a property. If you are a sophisticated investor, you may already have an idea on how long to hold and when to sell. Most of our owners are first time investors and somehow stumbled on real estate investment – they moved out and decided to rent their existing property, or a house in the neighborhood was up for sale and the vicinity helped them decide to invest and few other reasons.

You may want to look at your other goals and see which ones would benefit. Are you planning to help pay for college tuition for your children? How about retirement funding? Or you may have to assist parents and other close relatives with their health care costs? If one of your goals matches with above, then it becomes a somewhat easier decision on when to sell. For college tuition, yes, the children can get loans, but you must consider what your ROI is on the real estate investment vs the interest on the student loan. Even if your property has better returns, sometimes it is about the peace of mind of not having to pay the loans – student and mortgage.

You can use the cash flow on the property to use in your retirement or sell and invest in a regular income source such as annuity. Sometimes, the rate of return on both options would be similar but real estate comes with regular expenses such as insurance, property taxes and repairs and some of those never go away. A paid off property brings in other considerations but still has the regular expenses and, in the end, it comes to your goals.

And there are times when you need the money for an emergency, you may want to consider selling the property. Don’t think about what could have been if the market is not at its peak and you would have received better returns had you sold a few years earlier. You still received few benefits from the property such as depreciation, tax deduction on interest paid on mortgage, property appreciation, someone else paid for the mortgage via the rent. You may want to consult a financial advisor or tax accountant if you have multiple options.

In summary, you should look at your individual circumstances in making the decision on when to sell a property.  If you need help with making this decision, call us!