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If your rental has become a money pit with constant repairs, selling it might be your best move.
How do you know if it’s time to sell your rental property? I’ve owned rentals for years and I do believe in holding onto properties long-term. However, I also know that sometimes, selling makes more sense. If you’re caught in this dilemma, let me go over three factors that can help you decide whether or not selling your rental is worth it.
1. The hidden costs of selling. Selling a rental isn’t just about finding a buyer. Costs like commissions, title fees, and closing costs can take about 10% of the sale price. If you sell often, that loss adds up. But if you keep the property for decades, the cost becomes less significant.
2. Holding onto rentals pays off. The longer you own a property, the better your return on investment. Not only are you avoiding the high selling costs, but you’re also benefiting from appreciation and rental income. Over time, your tenants are paying down your mortgage. Moreover, if you’ve got a good property in a strong market, your property’s value will increase.
"If you can hold onto your rentals long-term, you’ll likely see the best returns."
3. Consider your age and long-term plans. Think about how old you are when you buy rental properties. For instance, I’m 49, so if I buy a 30-year-old home today it will be really old by the time I’m 80. At that point, the maintenance and repairs could be overwhelming.
I’d love to keep all my rentals forever. But sometimes, certain situations make selling the better choice. For instance, if you need cash for a new investment, selling may be your best move. It also makes sense if your property has become a money pit, with repair costs cutting into profits. If that’s the case, then reinvesting in a newer, low-maintenance property might be a better option. Another reason is to upgrade through a 1031 exchange, which lets you reinvest in a different property without immediate capital gains taxes.
If you can hold onto your rentals long-term, you’ll likely see the best returns. But if you need the cash, are dealing with constant repairs, or want an upgrade, you can go ahead and sell your rental. At the end of the day, the right time to sell really depends on your situation.
Whatever you decide on, you can reach out to me at (210) 802-9959. I can help assess your options and make the best decision for your investment.