Deciding When to Sell Your Property
The No. 1 reason to choose a property to invest in is positive cash flow each month. When it’s negative, it’s time to sell. Negative cash flow is the first sign your rental property may not be meant to be. Consider moving back into it or selling it.
If you're located far away from your investment, it's hard to maintain a relationship with your tenants. Showings become impossible. Feeling panicked about maintenance requests. It's not easy. If you’re moving away from your rental property, think about selling it and buying local. The property will be easier to manage, and you’ll have more control over your investment.
A cap rate is the income-expenses/value. The goal is to keep the cap rate between 5% and 10%. Generally, property investors determine the cap rate when choosing an investment property. However, if you are on the fence about whether to keep or sell a rental property, you should revisit this equation. Several changes can occur during the life of ownership that can turn a good cap rate bad. Did property taxes go up? Did the rental market in the area go down? Is maintenance more than expected? Are the utilities higher than you originally thought? Add up your monthly expenses over the year, and subtract that from your annual income from the property. Divide this number by the current value. If the percentage is less than 5%, you may want to consider selling.
