When Is It Time To Sell Residential Investment Properties?
Updated: Feb 10
Sometimes we will advise investors to sell residential investment properties. Here are the most common scenarios where it's best to sell your residential investment properties.
1. "Flip" Houses
Investors often want to supplement steady equity growth with cash flow surges. Therefore, they ask us to help find properties that won't be kept for rentals but will be turned into ideal owner-occupant homes. In the Midwest, we have found that the most successful flip houses are typically homes worth >$200,000 and <$500,000. We have relationships with several local wholesale companies that bring us the best opportunities to make a profit. Be warned, flip houses can be a tricky since they require so many correct bets (after-repair value, strict timelines, remodel budgets, etc).
2. Improve Your Investment Portfolio
Investors often have a portfolio of assets. However, those assets may not be the right mix to optimize their return. Sometimes a portfolio will have too many high-end houses and other times they will have too many low-end houses. High-end houses in the Midwest rarely give owners a return that they are happy with because it's challenging to get a rent rate commensurate to the property's value. Low-end houses can mean irregular rent and expenses and, again, owners are unhappy with their return. In order to optimize their overall portfolio return, we can sell off their high-end or low-end houses and better invest those funds into more advantageous properties.
3. Trade Up To Multi-Unit or Commercial Properties
When an owner wants to grow and simplify their portfolio, we recommend trading up from single-unit residential properties to multi-unit residential or commercial properties. We can utilize the tax deferral benefits of a §1031 exchange to sell several smaller assets and move to a larger one. Inherent in this process is also a mortgage re-finance which can improve capital efficiency.
If you are interested in discussing your portfolio and whether you could benefit from selling any of your residential investment properties, email us at info@chooseSNC.com.