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Opinions on real estate investment are easy to find. However, when it comes down to it, knowing exactly when to sell investment property is always going to be a tricky thing. This decision depends on your business cash flow, your personal goals and, of course, the current state of the real estate market.
However, there are a few things to keep in mind to determine when the timing is right for you. The following may be signs it’s time to sell your real estate investment.
You’re No Longer Local
Are you serving as the landlord for your investment property? If so, moving out of the area can sometimes put a dent in things. Managing things remotely can be challenging, especially when it comes to issues like fixing things for your tenants and being on hand to handle problems on site.
If you really love your property, you may want to stick with it. However, you may want to relocate your real estate ambitions along with your household — it can save time and stress knowing you can quickly hop over to a property to take care of issues. Ultimately, the right choice depends on market performance and your personal preference.
Hiring a property management company to handle things from afar may end up being more cost-effective for a rental in a hot real estate market. That way, you can still enjoy the passive income of real estate investment while paying for a professional company to manage the day-to-day operations of responding to tenants and making repairs.
Your Cash Flow Is Negative
If your investment property happens to be a rental property, negative cash flow indicates it might be a good time to move on. As a rental property owner, losing money directly impacts your return on investment, and the longer it goes on, the more money you lose.
How do you keep track of cash flow as a real estate investor? First, even if you’re a one-person operation, make sure to carefully and accurately track your business financials. Your cash flow should be tracked in a neat, accurate data management system — whether that’s a spreadsheet or software — and you should log every rent payment, repair expense and bill to keep tabs on how the property is performing.
Are you confident the data is accurate and the situation doesn’t look good? Don’t let the sunk cost fallacy affect your long-term financial health. If negative cash flow seems like a pattern, selling might be the best way to make the most of your investment before you’re out any more money.
You Have Other Investments in Sight
Whether your rental property is your only investment or you have a few more streams of income, you probably have your sights on many investments. If you’re looking to grow, diversify or move on to something else, knowing when to sell investment property can give you a head start and provide a clean slate so you can move forward.
The younger you are, the more aggressively you can invest, which means there is no time like the present to take chances. If you’re spending too much time or money on a single opportunity, don’t be afraid to cut the property loose and invest your resources in real estate opportunities with better long-term value.
It’s More Trouble Than It’s Worth
This one is similar to the question of cash flow, but it takes more than just monetary value into account. Your time is also a valuable asset to consider. Unless you are flipping or doing renovations, investments and properties tend to be a bit more hands-off.
If you are doing a flip, you need to see clear value from it to truly make it worth your time and effort. If your investment property is more trouble than it’s worth, it could be time to collect what you can and walk away sooner rather than later.
Your House Flip Is Finished
This is an easy one. If you’re flipping a property, you should probably look to sell the minute the work is done. The sooner you put a fresh renovation on the market, the newer your features will seem to buyers.
This way, you can get a quick return on your investment and move on to the next flip, or your next endeavor altogether.
Knowing When to Sell Investment Property
Real estate investments are all about timing. If you’re not making the money you want to see, your sights are already set on other things or you’re done with renovations, selling could be the right move.
Knowing when to sell investment property comes down to your faith in your process and your gut instinct as an entrepreneur. Follow the data and make sure your property investment is in line with long-term goals. That way, you can make the most out of your investment property — whatever that means for you.