Should I sell my investment property? Real estate can create a passive income stream, offer a fantastic rate of returns and provides leverage to build further wealth as its value typically increases substantially over time.
However, there comes a time when you need to analyze your portfolio and cut the properties that are no longer serving your best interests.
Sell too quickly, and you could miss a property boom and all the capital that comes with it, sell too late, and you could see your properties value stagnate, while you lose the chance to invest in better opportunities.
So, when’s the perfect time? How can you tell if your property is a ticking time bomb that’s better off sold? Keep reading below to learn our tips and tricks that we have gathered over years of experience in the industry to help you decide if you should sell your investment property.
Your property produces a negative cash flow
Is your property paying you each month? This is a perhaps one of the most important questions investors should ask themselves when considering selling a property. If the answer is no, is there a way that you can change that?
If your property is paying you money every month, the longer you hold it, the more money you are going to make. Owning an investment property means that cash flow varies from month to month as expenses vary, this reason alone makes it harder to determine if your property is a flop or your cash flow is merely being affected by property management issues like tenants moving in and out.
The bottom line is that if it isn’t generating income for you, it’s not worth your time. When reflecting on your portfolio make sure you write down your goals for your properties.
Remember if the reason you bought the property was to assist you in income, why would you even consider keeping it when it continually generates negative cash flow.
Your property causes Headaches
Being a passive real estate investor means you are not actively involved in your property. Usually, passive investors will inquire the help of a property management company to take care of your tenants. The last thing you want on your plate is issues that require your time and energy.
Does your property always seem to have something new wrong with it? From Leaky pipes to bug infestation if it always needs attention, chances are it’s not worth it.
Unless you’re a flipper and live for the DIY side of a property, Maintenance issues that arise are headaches. It’s easy to get lost in the world of DIY; you can find yourself splashing out thousands to get your property up to par.
If you find yourself in this situation, debating selling your investment properties, we suggest creating a recount of every cent you have put into place in the last three months. This way you can get an idea of if you have a money pit on your hands or not.
You Need the Capital
Owning a property is a considerable commitment, timing situations can be critical for investors. You may have taken on the property when you were in a secure financial position where you had enough capital to cover the upfront costs.
Times change so do situations, new expenses arise, and lifestyles change. If you need the money that selling your investment property would give you, then pulling out may be the smartest option.
Selling an investment property that is providing you with a positive cash flow isn’t advised. Don’t get tunnel vision and think that selling your property to buy a new Mustang and a vacation to Hawaii is a better solution than dealing with paying for repairs etc.
However, if you are struggling with mortgage repayments, have college tuitions fees biting at your heels, need retirement funds, etc. then selling may suit your situation.
Situations and environments change, sometimes its best to let go of the property to reflect on new goals set.