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Selling Your Investment

If you own property that you hold solely for rental/investment purposes, you probably have a great deal of discretion about when you sell the property. As with other investments, you may be wondering when is a good time to sell.

Surely you have some sense from watching real estate prices and rental vacancy rates whether your local market is strong, weak, or somewhere in between, and your examination of some public information can help you better determine whether now is a good time to be cashing in your chips:

  • Economic health: The vitality of the local employment market is crucial to a healthy local real estate market. What is the unemployment rate in your local area and how does that rate compare with prior months and years?
  • New construction: If real estate prices have been on the rise, the number of new building projects may be on the increase, which can be a sign that now is a good time to sell. As more properties come onto the market and prices spiral higher and higher, eventually the increase in construction acts like water on a fire, extinguishing future strength.
  • Available land: Housing units must be built on land; the less land that remains available for development, the more upward pressure is exerted on housing prices.
  • Housing for sale: All things being equal, the fewer the properties for sale, the better the environment in which to be selling. In a strong real estate market, housing sells relatively quickly and the inventory of property for sale is in relatively short supply.
  • Rental real estate market health: Although being a renter is tough when vacancy rates are low and falling and rental rates are escalating, being the owner of rental/investment real estate is great. Rental real estate is worth more when the local rental market is strong.

Utilize agents with investment property experience

Be sure to hire an agent who specializes in selling your type of investment property in your area. An agent lacking experience with selling investment real estate similar to yours may misprice your property and lack the special skills necessary to market and successfully sell it. Be sure to ask agents you're interviewing for activity lists detailing each property they listed and sold over the past year.

Visit comparables and review the valuation analysis

Especially if you've owned investment real estate for a number of years, your property may be very valuable. If you are going to hire a real estate agent to help sell the property, interview agents who specialize in selling such property in your area. Each agent should prepare a comparable market analysis to evaluate your property's worth. By digging into the details of each comparable market analysis the agents provide you, you can better determine your property's real worth.

For properties that have sold recently, there's no substitute for actually seeing the property. You may be surprised at how many property owners are willing to show you their property. If you have doubts about the value of your property, even after having real estate agents prepare a comparable market analysis, spring for the fee of several hundred dollars and hire a good real estate appraiser who has experience with rental properties like yours in the area.

Some rental buildings are simply difficult to find comparable sales for. Perhaps no similar buildings have sold for a long time in the area or no similar properties exist. Overprice your property and it may sit unsold for many months and end up fetching less than it otherwise could in the real estate marketplace. Underprice your property and you may leave a great deal of your money on the table.

Work with rental-property-experienced tax and legal advisors

If you're dealing with rental real estate, expect complicated and unclear tax and legal issues to get in your way. If you choose to hire advisors to help you navigate the morass, be sure that you're getting your money's worth in good advice.

Working in residential real estate is not sufficient experience for advisors to whom you're paying high fees for advice about your rental property. Tax and other laws pertaining to rental property sometimes differ tremendously from laws regulating owner-occupied housing. Hire advisors who specialize in dealing with rental property.