4 Reasons to Sell an Income Property

If you took our advice on purchasing an income property that makes sense the day you buy it, the issue should never arise that you’re thinking of selling because the property is turning into a financial liability. While we can’t promise that every deal you close will lead perpetually towards the land of milk and honey, it should sit on a solid enough foundation that you won’t be forced to sell because it’s not pulling its weight any more. Having said that, there are times when an investor might choose to sell an income property for one or more of the following reasons.

1. Maximized Profit: There may come a point in time when you believe that, based upon local economic factors, the income property has maximized the amount of profit it will generate and returns begin to dwindle away. Can you target a precise moment in time which can be proven is the optimum time to sell? Of course not. The best you can do is keep your finger on the pulse of the local economy and try to sell right after it peaks. At Bonus Commissions, we don’t believe that trying to sell based on a timing approach is your best option. It’s better to balance your portfolio by diversifying into other geographical areas, so that a single local economy won’t have as much of an impact on your profit. We like to say, “Don’t wait to buy real estate. Buy real estate and then wait.” Your area’s economy will come back. They always do.

2. Trading Up: You may choose to sell an income property in order to use the proceeds to leverage yourself into a larger property. This seems to make sense for an investor who wants to be a bigger player in the field but there is another way to go about it. Why not refinance the property you have and use the money from that to buy another property or three to go with the first one?

3. Maximized Depreciation: With rental property, you will have reached the maximum amount of depreciation allowed by tax law after 27.5 years (39 years for commercial property). Once the tax benefits for a particular property go away, it might be time to sell it and find another, at which point the 27.5 year clock begins ticking again.

4. Cash Out: Maybe you’ve got enough money saved up and you’re tired of the hassle of being in the rental business. Cranky tenants, leaky pipes, endless paperwork can do that sometimes. At that point, you need no other reason to sell than simply because you want to.

The Bonus Commissions Team

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