People purchase rental properties for a lot of reasons. Owning a second home to rent out can provide some good tax benefits, for instance. And the extra income can make a big difference in most family’s lives. However, being a landlord isn’t a simple undertaking. It’s a lot of work, and like any other investment, what makes sense now may not make sense a few years down the road. Here are three signs that it’s time to sell your rental property.
You’re not making money
If you’re not bringing in enough income from your rental properties, you’ve got a few options before you sell. First, make sure you’re running things efficiently. You shouldn’t be charging your tenants for services if you don’t have to, and you also shouldn’t be paying too much for certain services that you can get for little to no cost elsewhere.
The Internet gives you access to a ton of useful landlord tools. You can get free landlord software from Turbo Tenant, for instance, which will save you both time and money. When you’re a landlord, it may seem like you never have enough of both. Try to look at your operation and think of ways for you to cut costs without lowering the level of service you’re providing to your tenants.
Making the above changes often works, but if it doesn’t, that could speak to a bigger issue. You may be renting out a money pit that requires too much maintenance on your part. The local rental economy might not be as strong as it was when you first bought the property. If something like that is happening, it’s best to get out before you pour too much money into a property that isn’t going to give you enough back.
Property values are up
When you first got into the rental business, a one-room apartment went for about $800 in your neighborhood. Now the market value is over $1,000 and still climbing. You’ve also heard that neighbors are selling houses for nearly twice what they paid for them, which suddenly means your rental property is a hot commodity.
But maybe you don’t want to sell right now. That’s OK, but you can’t assume that the market will stay hot forever. In places like Southern California, prices are still high, which sounds good for sellers, but it’s not. Sales have gone down because buyers are frustrated and tired of trying to find a house they can afford.
High prices do not always correlate to high demand. If people are buying and selling at high levels right now, it’s probably worth selling your rental property a little sooner than you intended. Finding a buyer interested in rental property can be harder when the economy slows down. Pay attention to local trends. Talk to local economic experts if possible.You’re better off unloading rental property six months before you’re ready than six months too late.
You want out of real estate
If you’re drawing income from rental property, that’s considered passive income. But if you’re a landlord who is always taking care of something at your property, it’s not going to feel very passive. If you’re burnt out and tired of dealing with additional property problems, that’s as good a sign as any that you should exit the real estate market before you completely hate it.
For many people, taking care of their own home is more than enough. There’s nothing wrong with that. If someone in your family is dealing with a serious illness or other crisis, it’s perfectly reasonable to want to spend time with them rather than waste it upgrading and repairing a rental home. Major life events have a way of making you rethink your priorities. You should be a landlord because you want to, not because you feel like you have no other choice.