The answer to this question goes a little deeper than the obvious. You begin a career as a real estate investor to earn a cash flowing property income every month. Not ever investor hits pay dirt during the ownership of an investment property. Every great real estate investor knows when it is time to hold and when it is time to sell. Examining the factors that will assist you in making an informed decision are very helpful as you start or continue to grow your real estate investment business.
When to Hold a Property
When you first buy an investment property, the excitement can be close to overwhelming. Purchasing a property that needs no work and already has tenants signed to a lease is even more exciting. The guaranteed monthly income that rental property provides is one of the most sought after investments in America. There are expenses, but every property has similar expenses.
When you advertise and find a great tenant, it is likely that you will continue your monthly income generation for years. If you own your property free and clear, the rental income that you earn is pure profit. If the home that you purchase is in excellent condition, none of your money will have to be spent on unexpected repairs or upgrades if you consider upping the monthly rent. When all of these factors are working in your favor, you would have no reason to ever consider selling your investment property.
When to Sell a Property
Every property owner will be faced with one or more tenants that do not contribute favorably to the success of a property. Everything from damage to constant requests for upgrades are common. A high turnover with tenants is one of the downsides that will severely hurt your income potential. Your reputation could be affected and potential tenants could wonder why they should rent a property you own with such a high turnover.
Shifts in the economy are natural and can affect the success of an investment property used for single family living or vacation rental. When retirees, families and single workers have less money to travel, it affects the income generation of rental properties. Constant damage from severe weather can wreak havoc on rental properties and insurance companies typically raise annual premiums. This creates an additional expense that can add up over the course of owning a dwindling rental property.
Know When to Move on to Another Property
No investor enjoys the process of sitting back and watching a property lose value and income. Some properties never recover from market shits and some double or triple their value. Getting expert advice from a property management company, real estate consultant or accountant can add insight into helping you make a decision to hold or to sell. There are times when it is financially right to move on to a new property. Real estate investment properties are a constant learning experience and what you learn from one property can help you find success in another.