Sometimes, real estate investors struggle to come to a decision about whether to keep renting out an investment property or to sell it. There’s not necessarily an easy right answer in any given case, as so much depends on your personal financial situation and goals, the makeup of your investment portfolio, the local real estate and rental market, and other factors. However, there are good reasons to sell a rental property in many instances that can help give you some clarity.
If you’re on the fence about what to do, consider whether any of these reasons to sell a rental property apply to you.
When to Sell a Rental Property
- You’re losing money. This is the most obvious of reasons to sell a rental property. If the monthly income it generates doesn’t exceed the total amount that you spend on it, it’s probably a good idea to sell. Of course, you may be able to find ways to charge higher rent and turn things around.
- You can cash in for a great profit. Maybe you’d always intended to flip the property, or maybe not. But if you bought low and have an opportunity to sell high, or you’ve made a number of improvements and upgrades over time that have significantly raised the property value, or you find yourself in a real seller’s market, go ahead and take the win.
- You’re tired of the responsibilities. If you manage the property yourself, it can be time consuming and come with any number of hassles. What once seemed like a nice, relatively passive source of income may be more of a headache than you want to deal with at this point. If it still makes financial sense, consider using a property manager; otherwise, it could be time to unload.
- You want to trade for something different. If you’ve come a ways financially since you purchased the property, you might be interested in acquiring something more upscale or in a different location and commanding higher rent. Or, you might now be interested in owning multiple apartment units instead of a single-family home. If you have your sights set on a different approach to investment properties, it could make sense to sell one before buying another.
- You’ve become emotionally involved. Emotions can get in the way of smart investing. One fairly common example is when a landlord becomes friends with their tenants. You may start letting them pay late, waive a certain policy, forgo inspections, opt not to raise the rent when the lease comes up for renewal, and so on. This is another situation where using a property manager can help, or it may be one of the compelling reasons to sell a rental property.
- You’re moving away. Again, a property manager could potentially come to the rescue here. But if the numbers don’t make sense, or if you’re just not comfortable not being able to see and manage your property, you might decide it’s best to sell if you’re leaving town.
- You’ve arrived at a trigger. Perhaps it was always part of your financial plan to sell the property when a certain event or milestone comes. This could be retirement, the birth of a child, a kid going off to college, etc. Or, an unexpected event like a layoff or a death in the family could be cause to sell. Note, though, that you shouldn’t let a stressful event push you into a rash decision; meeting with a financial adviser would probably be helpful if this isn’t a planned action.