Are you tired of having the responsibility of a rental property? Or are you simply ready to buy a bigger investment? One of your main questions is probably “When is the right time to sell?” Here are three key things that suggest it might be a good time to sell your property.
- Negative Cash Flow – The main reason to invest is to ensure a positive cash flow each month. When it is negative, you should take that as a sign to sell.
- You live too far – When you live closer, managing your investment property is easier. But if you live too far, it’s hard to create relationships with your tenants. Showings can take up the majority of your day in travel time alone. Maintenance requests become time-consuming and you end up dreading the late-night phone calls. Distance is another sign you cannot ignore.
- The cap rate has changed – the capitalization rate measures the rate of return on a rental property. In short, it is the net operating income/market value. For example, $10,000 NOI/$125,000 market value = .08 or 8% cap rate. There are many things that can impact this.
- Was there an increase in property taxes?
- Did the rental market in the area go down?
- Is your utility bill a lot higher than you had planned?
Tip: Add up your monthly expenses for the year, subtract that from your annual income from the property, and then divide the number by the current values. Is the percentage of less than 5%? If not, this is another sign that it might be time to sell.
It is okay if an investment doesn’t make sense as the years go on. You just have to know when it is time to sell. Your next property investment is waiting for you – if of course, you are still looking to go down that path.
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