Real Estate Prices Are Up!
Should You Sell Your Rental Property?
Real estate prices are at an all-time high, making it a perfect time for many landlords to sell their properties. Should you sell your property? It depends on what you want to do with the property and if this is something you want to have for several years as an income source. There are a number of variables that factor into selling a property and when it is the right time to sell. Property managers in Salt Lake often tell you not to sell, but real estate agents are always pressuring you to sell.
What you NEED to know before you decide
Before you can make a decision about selling your rental property, you must first answer the following questions for yourself.
- Why would I want to sell/not sell my property?
- What do I want to accomplish?
- Does selling or keeping my rental help me achieve my financial goals?
- Do I have equity in the property, and what should I do with the equity?
- Is there another investment that will offer a greater return?
- If this investment is not profitable, can it be restructured to fit my financial goals?
Once you have answered these questions for yourself, you will be in a better position to make an informed decision selling or keeping your rental property. If you want to sell because you cannot afford to keep the property, your answer could be yes. If you want to sell because managing the property gives you headaches, consider hiring a property management firm in Salt Lake. A qualified property manager will be able to help you earn money from your property and maintain a consistent income. If you haven’t crafted a plan for the equity in the property, you might not want to sell. However, individuals planning to take the equity and re-invest into multiple properties may find this to be a successful outcome.
If you do want to sell, here are some things to consider:
Everyone is doing it
Several real estate investors are buying into the hype surrounding rental properties and selling when the real estate market is high. If everyone else is doing it, shouldn’t you? Remember when the housing market collapsed in the late 2000’s? Those investors that sold at the peak often came back and picked up properties for dirt cheap. Novice investors often sell rental properties while the experienced ones are buying up luxury properties and others for steady cash flow.
Rents are at all time highs
Over the last 30 years we have seen a boom in the property management business. Real estate investing is a great opportunity for many investors as it grows your portfolio, and eliminates the need to work a standard nine to five job. Rents are at an all-time high and investors are capitalizing on the increase in cash flow. Novice investors tend to follow the crowd by selling rental units, which can cause a decline in available properties to rent, allowing market rent prices to increase. Most markets are seeing a rise in rental rates and property appreciation, making now a great time to be a rental property owner.
Rental demand at record levels and only projected to increase
There is a lot of talk about the Millennial generation and the way they invest and rent properties. The buying habits of this generation have impacted the real estate market tremendously. Millennials seemingly have much less interest in owning their own home. Many of them are renters and wait until later in life to purchase a home. The millennials are enjoying the ability to be free and not tied down to a mortgage. This generation enjoys traveling and changing employment. Renting is easier for millennials as they do not want to be tied down and want to be able to cut ties quickly when the next adventure arises. As millennials are on the rise, we have seen an increase in the demand for rental properties.
Older generations are also increasing the demand for rental properties as they are retiring and looking to downsize. The recent housing collapse have made a number of seniors weary of the housing market and many are looking to get out while the rates are high. Many retirees want to sell their homes and invest it back into safer investments to ensure they will have money for their senior years.
Whatever the group or demographic, all are contributing to a sharp rise in the rental market. In addition to rising rent, property managers and landlords are seeing a sharp increase in the quality of tenants applying for properties. Rising rents and better tenants are all great signs for real estate investors.
All economic forecasts see more demand and higher rents
Almost every economic forecast is showing a high demand for rentals and increasing prices for rental units. There are factors that experienced real estate investors are seeing and getting excited about as they are buying up additional real estate due to it.
Investment that uses other people’s money
Real estate investing is unique as it does use others money to require assets. The asset will appreciate over time, allowing you to only tie up a small sum of money for a short time. With rental units, usually someone else is buying the property and someone else is paying for the property. Most properties will provide some type of cash flow each month. It’s similar to using a bank to invest in the stock market by finding another person to pay for the bank loan and having the stock market continue to grow the funds while you enjoy monthly dividend checks.
High Return On Investment
One of the common mistakes new real estate investors make is miscalculating their return on their investment. The common mistake normally comes with the total purchase price of the home calculated rather than the actual money the investor tied up in the property. Novice investors can fail to add the monthly positive cash flow into their equation. Here is an example you can use to calculate the return you will receive on your investment.
This example assumes a property value of $200,000 with yearly appreciation of 3%, a monthly cash flow of $100 after all expenses, and $30,000
| Appreciation | $200,000 x .03 | $6,000 | |
| Cash Flow | $100 x 12 months | $1,200 | |
| Equity/investors cash | $30,000 | $7,200 / $30,000 = | .24 |
| ROI = | 24% |
It is a great time to own rental property, however, choosing to sell your investment should be determined by what better helps you to achieve your goals. Hire property managers to deal with your Salt Lake real estate if you are struggling to manage the rental units and investing your money.
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