High Home Prices – Should I Sell My Investment Property?
Posted by Shawn Simpson // February 26, 2020
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High home prices – should I sell my investment property? Financial Samurai writes, “I believe the best holding period for real estate is forever. By not selling, real estate owners ride the unstoppable inflation wave and never have to pay any onerous commissions and long term capital gains tax. But forever is a long time.”
High Home Prices – Should I Sell My Investment Property?
The
reasons some people sell are a little more complicated. According to Upside,
Some of the most common reasons people sell investment properties are:
- They need money – Whether it’s to improve
cash flow or access money to put toward a better investment, many property
owners simply want the funds that selling an investment property can provide.
- Their needs have changed – Changes in
financial or personal circumstances (such as growing a family) can mean having
an investment property is no longer a feasible option.
- Their marginal tax rate is low – Selling
when taxable income is low usually equals less Capital Gains Taxes to pay.
- The property isn’t performing as expected –
Unfortunately, there’s no such thing as a property market crystal ball, and
sometimes performance expectations don’t come to fruition.
- The potential for growth is low – If the
market in a particular area has come to a standstill, investors may choose to
get out before values drop further.
Considerations
For When To Sell An Investment Property
- When you have a significant
life event. There are some key life events that warrant the
re-evaluation of owning investment properties: a new family member, a death in
the family, a terrible accident that requires extra care, an unwanted layoff,
or a job relocation, to name a few. Major life events may require
more of your time or money. If you’re unable to work, some life
events may necessitate that you keep your rental property for semi-passive
income.
- When you have more
significant sources of passive income. Besides rental income,
there’s dividend income, bond
income, REIT income, real estate crowdfunding income, P2P income, CD income, and royalty
income.
- When your cap rate is below the risk-free rate of return. Think of a cap rate as
your net rental yield. The Cap rate can be calculated as Net Operating Income /
Value Of Property. NOI is calculated by subtracting all expenses
from gross rental income. If the cap rate is below what you can earn in a
risk-free 10-year Treasury bond doing nothing, you should consider selling
because you’re not adequately compensated for the risk you are
taking. Currently, the 10-year Treasury bond yields less than 1.4%.
Your gut is not a reliable
indicator
People
have been saying through the whole price explosion in real estate that prices
can’t go any higher. After all, you need more income each year to afford a house,
yet prices keep rising because of the lack of inventory. High home prices are not a reason to sell your investment
property. Usually, prices run higher than you anticipate and selling leaves you
out of the market with capital gains to pay.
Styl
Properties, Inc. is
here to help homeowners out of any distressed situation.
As
investors, we are in business to make a modest profit on any deal. However, we
can help homeowners out of just about any situation, no matter what!
There are no fees, upfront costs, commissions, or anything else.
We offer the simple truth about your home and how we can help you sell it
fast.
Give
us a ring. We would love to help you understand the process and to answer all
of your questions. You can reach us at 402 999.0577.