When To Sell Investment Property
If you have an investment property, say a rental property, there may come a time when you begin to think about selling it. Here are some of the circumstances under which selling an investment property may make sense.
Alternative Streams of Income
With few exceptions, you should never pull out of any form of investment if you don't have alternatives. Do that, and you might be left with no income. Wait until you have alternative sources of income to sell your investment property. For example, you can sell your rental property once you have invested in a few companies and get regular dividends.
Sell your rental property just before the market experiences a glut. Many people, especially first-time investors, overestimate the impact of infrastructural development on the housing market. Therefore, a developing area is likely to witness a growth of real estate properties. Such a spurt in growth is usually followed by a slump. Thus, consider selling your property when you sense a glut.
You can also dispose of your property when the expenses start to rise. You don't want to get to a stage where the expenditures equal or outweigh the revenue. Expenses can increase if the local government raises property taxes, the property ages, or construction prices increase. Being a realtor, like any investment, is about minimizing costs and maximizing revenue.
Decreasing or Stagnant Income
Ideally, your rental income should be appreciating over the long term. You should be worried if the income stagnates for a long time or starts to come down. That would leave you in the same situation as increasing expenses. You don't want to be stuck with a property that cannot sustain itself or give you a profit so you can sell the property.
Eggs in Baskets
Just like it's dangerous to have all your eggs in one basket, you shouldn't put all your investment resources in rental properties. Many people start with one property and then increase their investment over time. If you continue with such a trend, there will come a time when over half of your investment resources are in rental income. That is a dangerous position to be in because an unexpected disaster can wipe out most of your investment.
People buy investment properties for different reasons. Apart from regular income, some people also hold investment properties for use on rainy days. Thus, you can sell your investment property if you need a large amount of money — for example, if you want to start another business or raise funds for medical treatment.