This is not an uncommon train of thought of late...
- Wow, look at the list price of that townhouse/house near where I own a rental property.
- Wait, what!? It's already under contract!?
- Oh my. It sold for nearly full price, or full price, or above full price.
- Maybe I should sell my rental property if I can get that sort of a price for it!?
So, how then should you think about whether to sell your rental property? It is, after all, a very strong sellers market.
Some thoughts to consider...
- While there are not any current indications that home prices will decline from the high levels where they are now - they certainly have not been this high, ever. As a result, some owners of investment properties might decide to sell now to capitalize on these never seen before home values. Some will decide to continue to rent the properties, anticipating further increases in home values over the mid to long term even if there is not a guarantee of continued increases in the short term.
- If you are going to sell your rental property you will get the best price for it if you move the tenant out, make any necessary repairs or improvements and then sell it to an owner occupant. An owner occupant will pay the highest price in the current market for most rental properties, and they won't want to inherit your tenant.
- If you are going to sell your rental property you should think about the tax implications of doing so. If you don't reinvest the proceeds in another rental property (via a 1031 tax deferred exchange) then you will likely have some taxes to pay when selling.
- If you have a good bit of equity in your rental property and you would want to use that equity for something else (other than investing it for the long term) then it could be a good time to sell the rental property.
- If you have a good bit of equity in your rental property but you don't anticipate a need for accessing those funds anytime in the next five or more years, it probably makes more sense to keep renting the property.
Clearly, these are just some of the factors to consider when evaluating whether to sell your rental property. I'm happy to talk through your particular scenario with you, and we may also want to connect with your financial planner or accountant as well.
Feel free to touch base if I can be of help to you as you think through these decisions.
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