Investing in property is an art. You need to buy at the right time and sell at a good time as well. There are multiple opportunities when you should consider selling. Each has its advantages and disadvantages.
Increase in Ownership Costs
Most often, this is because of a large increase in property taxes. It can also be a result of additional requirements to keep a property up to code. For example, a city might start requiring you to install a sprinkler system if you have multiple units. This can easily cost five figures.
Rather than deal with the additional ownership costs, some property owners will opt to sell.
Real estate is a large capital investment. Often a property will represent a sizable part of your portfolio. This can unbalance it, and you will be hit badly if the property market heads downward. You can decrease your exposure by diversifying. You can sell your property and put the proceeds in the stock market.
Not everyone is a buy-and-hold investor forever. Your initial plan might have been to keep the property for five or ten years. After a run-up in prices, it might make sense to sell. You’ll be able to get back your proceeds and generate a large profit.
Decrease in Rental Income
Unfortunately, some investment plans don’t work out. Your rental property’s income might decrease. Perhaps rents are stagnant, or you underestimated your costs. Either way, it might make sense to bail.
Aversion to Debt
Some people don’t like debt. Maybe they had a bad experience with it or read some scary stories. Either way, one avenue to eliminate mortgage debt is to sell your rental property.
Negative Cash Flow
This is worse than a mere decrease in rental income. Often, this is the case in houses with a lot of vacancies. You’ll be unable to generate the revenue needed for the mortgage and the upkeep of the property.
No Desire to be a Landlord
Being a landlord isn’t for everyone. You have to deal with tenants and paperwork. You’re exposed to legal issues. Things like damage and vacancy are stressful.
Knowing when to sell investment property is difficult. It’s partially analysis but also requires some business instinct.