Thinking about becoming a landlord?
When you’re researching the investment option and looking for properties, you’re probably not thinking about selling.
But thinking long term and understanding the reasons for selling investment property can help you make smarter buying decisions.
Knowing why other landlords sell can help you choose your property strategically to avoid certain pitfalls. It can also help you develop your long-term strategy for buying and selling properties.
Here are nine reasons landlords decide to sell their rental properties.
1. Negative Cash Flow
You go into a real estate investment expecting to make a profit, but it doesn’t always work out that way. It can be a risky investment option.
Don’t let the first sign of negative cash flow scare you into selling. You could recover.
It’s common for a rental to remain vacant for a month or two between tenants.
But once you get the property rented, you’ll be back in the positive cash flow.
If you have lots of tenant turnover, the negative cash flow could become a bigger problem.
It can also be an issue if you borrow money to buy the property. Between the loan payment, taxes, maintenance, and other expenses, you might find yourself in a position where you’re losing money.
Landlords sometimes decide to sell if negative cash flow becomes a regular occurrence more months than not.
2. Too Much Maintenance
Depending on the age and condition of the rental property, it can take a lot of work to keep it maintained.
As the landlord, you’re required to make repairs when needed.
If you handle the work yourself, a house that needs lots of repairs is time-consuming.
If you hire out the work, it gets very expensive, especially if there are major issues with it. This can be difficult to afford if you’re on a tight budget or don’t have much capital available.
Some people decide it’s better to sell quickly and let someone else deal with the problems.
3. Not What You Expected
Being a landlord isn’t for everyone. Some people enter into this investment option not fully understanding what goes into it.
For some people, it’s tough to handle the difficult parts of having a rental. They don’t like tracking down late rent payments or they feel bad enforcing their own rules for tenants.
Others simply don’t enjoy it as much as they thought they would.
Selling is an option if you get into it and decide you’re just not cut out to be a landlord.
4. Change in Investment Strategy
You might enter the real estate investment market with a few residential properties. It’s a common option that’s usually a less expensive in the beginning.
But you might decide you want to switch gears.
Instead of single-family homes, you might want to invest in a multi-family dwelling.
You might decide you prefer commercial real estate investment. It’s a lot more work, but it can result in greater profit.
Or perhaps you want to get out of real estate and invest your money in another way.
Whatever the reason for your change in strategy, selling your rental properties frees up the capital to take a new approach.
5. Seller’s Market
When the market is in favor of the seller, landlords sometimes decide to sell and make a profit.
This can be especially beneficial if you bought the property when prices were low. The increase in property value earns you a significant amount over what you spent to buy the property.
Keeping an eye on your property value makes it easy to see when it appreciates. If you’ve been thinking about selling, consider making the move at the ideal time.
6. Inherited Property
Some landlords come into owning a rental due to inheritance.
For some, being a landlord isn’t something they’re interested in at all. They might sell right away.
Others might try managing the rental property but realize it’s not a good fit.
If you’re in this situation, you might consider hiring a property manager to handle the day-to-day management. If you don’t want to deal with it, selling is often the best option.
7. Planned Strategy
For some landlords, owning a rental property was never expected to be a long-term situation. They planned to sell at a certain point, and that time has come.
Having a strategy for how and when you want to sell is a good idea going into your real estate investment. That plan can always change once you get further into the venture, but starting off with a plan will help you make good decisions when it’s time to sell.
8. Long-Distance Property Management
Managing a rental property yourself from a distance isn’t easy. It’s difficult to keep a close eye on your property and know if your tenants are taking care of it the way they should.
If a problem arises, you can’t swing by and check it out yourself quickly. You either have to drive a long distance or call someone to go fix it locally.
You can hire a property management company, but that cuts into your profits.
Maybe you’ve always been a long-distance landlord and it’s starting to wear on you. Or perhaps you used to live close to the rental but recently moved.
Whatever the reason, being physically far away from the property can make it difficult to manage. You might decide to sell and buy a property closer to home.
9. Increase in Extra Costs
You base your rent on your current expenses, but those expenses often change over time.
Property taxes seem to increase consistently. If the property is in a community with HOA fees, you can expect them to increase.
If you can’t increase your rental prices along with the increase in expenses, you might find it cutting into your profits more than you want.
Selling is an option when your other expenses start increase.
Plan for Selling Investment Property
The reasons people choose for selling investment property vary based on the situation. Keeping your overall strategy in mind helps you decide when it’s time to step away from your rental property.
Are you interested in selling your rental property fast? Contact us to learn more about our quick home purchasing process.
