when to sell a rental property

Should I Sell My Rental Property in 2024 or Keep My Investment?

Should I sell my rental property or keep it?

Well, it’s important to keep in mind that knowing when to sell rental property can make a significant difference in terms of the property’s value. While the rental you own is an investment property, this doesn’t necessarily mean that holding on to it is necessarily the best option.

This informational guide will help you evaluate your unique situation and make the right move for you – taking your plans, motivations, and goals into careful consideration.

Should I sell my rental property in 2024?

If you’re thinking about whether or not it’s time to sell your rental property, there’s a lot to consider, including tax implications, the market, the profitability of your rental, the amount of work that goes into maintaining and renting out the spot, the kind of luck you’ve had with renters, and so on.

The question should I sell my rental property now is one that only you can answer, but having the information you need to adequately assess the situation helps.

At SoCal Home Buyers, we are real estate investors who pay cash for rental properties as is, which means there’s no reason for you to jump through hoops in order to prepare your rental for sale. We proudly serve Southern California and offer a speedy process that involves scheduling a convenient inspection that will lead directly to a fair cash offer, which – should you accept – can be in your hands in just a day or two.

When to sell rental property

A rental property can be a great source of income and an excellent investment, but it is also an immense responsibility that requires considerable resources in the form of both time and money. If you’re having doubts about your situation and are wondering when to sell a rental property, knowing the following common reasons for doing so may help. 

1. The cons outweigh the pros

If it’s gotten to the point that you simply don’t have the time necessary to put into your rental property and it feels more like a burden than an investment, it’s a pretty good sign that it’s time to sell your property. It’s one thing to make property management your career, but trying to squeeze property manager duties into your already busy life is quite another. 

2. The rental is worth considerably more than when you bought it

If the idea behind your rental purchase was to turn a profit and get out and you’ve already accomplished that, it’s a great reason to sell. Not every investor in rentals is after long-term rental income, and turning a relatively quick profit is a perfectly worthy goal. Selling when the price is good always makes sense.

3. You’re over it

You gave the landlord thing a shot, and it isn’t for you. Perhaps you’re considering the sale of inherited property that you wanted to keep in the family but have reconsidered. There’s no shame in moving beyond this experiment and setting your sights on something to which you’re better suited. There are a lot of good reasons for selling a rental property, and simply wanting out is one of them. 

4. The market is hot

If the market is hot and the price is right, it may influence your decision to sell – even if selling wasn’t on your mind to begin with.

5. The cash flow isn’t there

Investors typically hold onto rental properties because they generate income, but if you’re experiencing a negative cash flow, it’s time to reevaluate. Maintaining a rental property is an expensive endeavor when you factor in repairs, tenant-related hassles, the cost associated with vacancies, and much more.

Ask yourself if you’d invest in the property today knowing what you know now, and if your answer is a resounding no, it can make it a lot easier to walk away.

6. Maintenance is getting out of hand

Some rental properties run like clockwork, and if you have the right tenants on a lease, it can be an investment that keeps on giving. This – of course – isn’t always the case. While every property needs upkeep and maintenance, some seem to require constant care and attention.

When you add in additional factors – such as, for example, the tenants themselves being not only hard on the place but also slow to pay rent in addition to rising property taxes – you may decide it’s time to make a change.

7. You sense change coming 

Maybe you’re just getting started with a rental property and everything is going fine but you get the distinct impression that things are about to change. If you gave a rental property a whirl but you’re thinking it’s ultimately not for you, you may want to listen to that little voice in your head telling you to sell your investment.

8. You’re going through something

Your life isn’t put on hold simply because you own a rental property or two, and if you’re going through a major life event, owning that rental may not be as advantageous – or even doable – as it once was. If you’re getting married, have welcomed a new child into your family, or are coping with the death of someone close to you – for example – it may be time to accept that things change and to commit to selling. 

9. You need to diversify

When it comes to investments, diversification is key, and if all your eggs are in the rental market basket, it may be time to branch out by selling your rental property and expanding your investment portfolio.

10. You are relocating

Being a landlord is a lot of work, but being a remote landlord is a lot more. If you’re relocating and aren’t interested in doing everything it takes to manage a rental property remotely, selling your current rental may be the best solution. 

How should I sell my investment property now that I’ve decided to move forward?

You’ve crunched the numbers, assessed your level of commitment to your rental property, and decided that it’s the right time to sell. What now? The good news is that there are a variety of options, and better understanding them can help you make the right choice for you. 

Sell for cash to a real estate investor

You’re ready to sell your rental property, but you recognize that listing through a real estate agent is a lengthy and costly process that requires a good deal of effort on your part. If you’re looking for something a lot less cumbersome that will leave you with a cash offer and will free you up to take on whatever comes next, selling to a real estate investor is the way to go.

At SoCal Home Buyers, we pay cash for rental properties throughout Southern California, and we’re committed to a seamless sales process . Simply give us a call, schedule a convenient inspection – to be conducted by our in-house professional – which will lead directly to a cash offer.

If you accept our offer, the cash can be in your hands in as few as 24 to 48 hours, which can help take the sting out of selling an investment property that you may have had high hopes for. 

Sell your rental home through a real estate agent

You can sell your rental property via traditional measures by using a real estate agent. If this is the route you choose, however, it’s important to keep all the following in mind:

  • The fees you pay and the commission the real estate agent takes can exceed any additional profit you experience. 
  • The rental property will need to be in decent shape, which can require making repairs and fixing things up.
  • The rental will need to be viewer ready, which means being decluttered, clean, and staged for viewings and open houses.
  • If your rental has tenants, you’ll need to coordinate with them in order to schedule viewings and open houses and to ensure that the property is looking its best around the clock, which is a tall order.
  • Selling a property with tenants can take considerably longer than selling your own home would take, and the longer the process, the bigger the hit to your profits.

Selling a rental property on the real estate market isn’t the best way to offload a property quickly, and – if you are ready to sell, time is likely money. 

Keep taxes in mind

When you sell the home you live in, the IRS allows tax-free profits of up to $250,000 for a single filer and up to $500,000 for joint filers. The only requirements include:

  • You must have owned the home for at least two years.
  • You must have lived in the home for two of the past five years. 

While selling at a loss is not a taxable event, it’s a different matter if you turn a profit, which is considered a capital gain and is generally taxed as such. Though considerable, capital gains tax is likely to be levied at a lower percentage than you pay in income tax. 

The tax breakdown is determined by how long you owned the property prior to selling it. If it’s only been a year or less, short-term capital gains tax applies, which uses the same rate as your income tax. If, however, you’ve owned the house for more than a year, it’s considered a long-term capital gain, which is taxed at a flat rate that will likely be lower than you pay on you income. When it comes to a loss on sale of rental property, taxes aren’t a concern, so also bear this information in mind when reporting sale of rental property.

Trade up

If you own a rental property that isn’t performing as well as you’d hoped, but you’re still interested in real estate investments and would like to try your hand in another market, there is a tax incentive that can help. The 1031 exchange allows property owners to sell a property and buy another that is considered to be like kind without being taxed on capital gains.

To qualify as like kind, the property must be another investment property, and the time frame allowed is abbreviated, which makes acting quickly – and working with a qualified tax professional – essential. 

Think about living in your rental prior to sale

If you’re wondering whether you should sell your rental house but are concerned about tax losses and the 1031 exchange isn’t an option, you may want to consider making the rental your primary residence. As long as you live in the home for at least two years, you’ll pass the U.S. government’s ownership and use test, which allows you to bypass capital gains tax. 

Parlay an excellent tenant into a selling point

If you’re ready to make a change and have many good reasons to sell your rental – but your tenants aren’t one of them – you can use them as a selling point. Most potential buyers are interested in using the rentals they purchase to generate revenue of their own, and finding great tenants can be the biggest challenge. 

If you have the world’s best tenants who are still on lease, the purchaser will need to honor that lease, and having assurances about the current renters can sweeten the deal considerably. Selling a rental with tenants comes with specific legal requirements, which you can read more about in our selling a house with tenants California guide.  

To sell or not to sell investment property: Our key takeaways on whether to sell or keep rental property

if you’re trying to determine whether you should sell or rent investment property, it’s time to take stock of the situation. For example, you should ask yourself if it’s worth it to keep the property as a rental – relative to the amount of work involved.

If all the signs point to selling the rental and you’re invested in saving time, SoCal Home Buyers can help. We pay cash for rental properties as they stand, and we’ve streamlined the process to make obtaining a fair cash offer in Southern California as simple as this:

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  1. Give us a call at 951-331-3844—or fill out the short form below—to request your fair cash offer.
  2. Await our prompt response to discuss your property in greater detail and schedule a one-time inspection that allows us to offer the highest amount possible.
  3. At the time of the inspection, our in-house inspector will quote you a fair cash offer, and if you’re on board, you can consider your home sold!
  4. Choose your closing date, and leave the rest to us. You can choose payment via check or wire transfer. It simply doesn’t get any easier.

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