How to find the best time to sell your investment property
Investing in property has been a proven way to create wealth, and can be one of the best investments you can make – not only does a well-chosen property generate income, it also appreciates in value. Even though property can be a great investment, there are times or circumstances when selling your investment property might be your best option.
But how do you know if, and when, you should sell your investment property? As with any decision that will drastically affect your current and long-term finances, the decision to sell and investment property needs to be carefully considered.
Perfect Agent discusses the different circumstances under which selling your investment property might be your best option:
The hassle of managing the property
Buying an investment property is not the end of the journey for a landlord. Once you have the property, you need to manage it – and this can greatly attribute or detract from the success of the investment. This entails having an in-depth knowledge of the laws and legislation that governs rental agreements and landlord/tenant relationships in the area in which the rental property is situated.
Under common law, landlords need to ensure the safety of the rental property and its contents – no injury may be caused to the tenants or neighbours due to negligence on the landlord’s part. However, there is also legislation that pertains to rental properties specifically, and landlords need to understand and adhere to these regulations, or risk facing legal battles. The rental property is the tenant’s home while they live there, and they have certain rights the landlord needs to respect.
In broad strokes, a landlord’s responsibilities include maintaining the structure and exterior of the home, ensuring all the installations work (including gas, electricity, etc.), taking care of potentially health-threatening or dangerous issues that arise (mould, gas leaks, etc.), and adhering to the rental agreement – a signed contract that the landlord and tenant both consented to.
In Australia, the different territories and states also have varying legislation governing rental properties, and as a landlord you need to ensure that you have a firm grip on the relevant regulations, and adhere to these.
If you bought an investment property thinking that it would be easy to simply manage it on the side, you could be blindsided and overwhelmed by all the admin and legalities you actually need to adhere to – it can be very time consuming, and you need to be ready to act immediately and decisively should any issues arise, no matter the time or inconvenience to yourself. You might find that the task of managing the investment property is too overwhelming and stressful, and not at all the passive income stream you were banking on. If you are very unhappy and stressed out about managing your investment property, it might be the right choice for you to sell the property.
Dealing with difficult tenants
Apart from the admin and legalities of managing the rental property, you could have the very bad luck of placing a bad tenant, which can considerably sour your happiness with the rental property.
A bad tenant can make your life very hard, and completely spoil the experience of being a landlord for you – but what makes a tenant ‘bad’? There are many factors that can turn your relationship with the tenant a fraudulent one – especially if you are managing the property yourself, which means you will be much more involved with the tenant, and need to communicate with them when and as necessary. The factors that can indicate future problems, or cause discord, range from clashing personalities to genuine legal concerns and everything in between. Three major concerns that you should not ignore and deal with as quickly as possible are when tenants fail to pay their rent on time, are causing damage to your property or conducting illegal activities on the premises. Other causes include the tenant constantly complaining, being unreasonable, causing disturbances that affect neighbours, not adhering to the terms stipulated in the lease agreement, and so forth.
If your relationship with a bad tenant has reached breaking point, it isn’t as simple as just asking the tenant to move out. Again, you will have to adhere to the relevant legislation of the state or territory in which your investment property is situated with regards to warnings, notice periods, etc.
However, even if you follow all the rules and regulations when asking your tenant to vacate the property, they can still refuse. This makes the situation even more complicated – you will now need to follow the applicable legal steps and procedures in the state or territory to legally ‘get back’ your property from the tenant. In most cases you will need to get a legal order for the tenant vacate from the relevant tribunal or courts. The notice or order to vacate usually gives the tenant a set amount of time in which to vacate the property. If they fail to do so, they can be forcibly removed by law enforcement.
Clearly, this is a very protracted and arduous process, rife with unnecessary drama and unpleasantness, and you could even lose money in the course thereof. This experience might sour your experience of being a landlord, leading you to decide to sell your investment property.
The cost outweighs the income
The reason why you decided to invest in property is to start building wealth by enjoying a passive income stream, as well as an asset that appreciates in value over time.
But what if, instead of earning you money, your investment property is costing you money? There are a few reasons why this might be the case:
- The area in which you invested is declining.
- The tenant is not paying their rent in full as agreed upon.
- There is an oversupply of rental stock in the area, meaning you can’t achieve a high enough rental to cover all expenses related to the property.
- The property you purchased was too expensive in relation to the achievable rental income.
- You underestimated the maintenance or repairs to be undertaken to keep or make the property habitable.
Although these issues can sometimes be unforeseeable, if you work with a qualified and reputable real estate agent when looking for an investment property, they should be able to advise you on the potential pitfalls of investing in a specific area or property, and guide you as to where and in which type of property to invest to achieve your financial goals. Nothing is ever guaranteed, but this is a very good start.
Solution: Sell and reinvest in a better area
If you’ve had a bad experience being a landlord, you might feel like the property investment route is not for you. However, do not despair or give up – investing in the right property is still one of the best ways to build long-term wealth.
What you should glean from your bad experiences is what not to do. As John Powell said: “The only real mistake is the one from which we learn nothing”. In fact, the lessons you’ve learned from your bad experience could actually help you be a more savvy property investor, leading to even greater success and financial gains.
Once you have sold your investment property with the help of a qualified and experienced real estate agent, you should start the hunt for your next investment property.
You should work with a qualified, experienced agent when looking for your next investment property. Tell the agent about your bad experiences, and be very clear about what you’re looking for: a well-situated investment property in a good area in demand with tenants. Discuss your income expectations – a good real estate agent will be able to guide concerning how much you will need to spend, what type of property will best suit your needs, and so on.
Even though there are times when it doesn’t work out, investing in property is still a tried-and-tested route to generating long-term wealth. Yet, there are still circumstances under which your best option could be to sell your investment property. Should this be the case for you, your best option for selling your investment property quickly and at the best possible price is to work with a qualified and reputable real estate agent. Do you think it’s time to sell your investment property? Perfect Agent can help you find the best-suited real estate agent for the job – at no cost to you. Simply complete our quick online survey to help us determine your needs, and we will provide you with two to three top-performing real estate agents working in your suburb within 48 hours. Contact us today, and let us help you make a successful sale.