In a sellers market, the real estate prices are usually higher than what you paid for your rental property. It is an excellent chance to make a profit and sell your income properties. But before you do, consider these two scenarios:
- Sell your properties for a profit
Obviously, if you need a quick buck, or feel like cashing out, this would be the time to do it. No one complains about making money and that was the reason you bought the property in the first place, right?
This is also a great opportunity for you to take your smaller properties and turn them into a larger, more profitable property (think four green houses one red hotel). Usually if you follow this route, depending on where you live, you can pay less taxes on the capital gains of the properties. Consult your accountant on the particulars for taxes in your area.
- Increase the rents and increase your ROI
In a sellers market you will see a lot of condo conversions happening. This reduces the number of rental properties on the market and gives you an excellent opportunity to raise rents. Raising rents gives you a higher ROI (return on investment) putting more cash in your pocket. With the shortage of rental units, you should also see an increase in your occupancy, again putting in more cash in your pocket. This is a good solution in the case of a joint venture partnership – both partners get more cash out of the investment.
Be sure to crunch numbers and talk to your team before getting on the sellers bandwagon – depending on your circumstances, selling may not be the best option for your portfolio.