Why Selling Rental Property is a Good Idea

The New York Times ran an interesting feature in March. The writer asked if rental property was really as safe and profitable as one assumed it was. She mentioned the story of a retired couple who had just invested in some property and mentioned the risks linked with their investment. Problematic tenants, costly repairs, and a long period of inoccupancy are some of the problems landlords face with rental property.

Renting is a profitable enterprise if you stick to your investment property for more than a few years. Inflation eats away your monthly mortgages while rents keep on rising. Initially, it will be very difficult to find tenants who are willing to pay rent that is more than your monthly mortgage – but down the line it will become easier. There are more than a few people who have been earning a large portion of their income by renting out properties.

There are many upsides to renting your property. The most attractive of them is having an asset. You are building equity that is being financed by someone. At the same time there are many downsides and risks to owning a rental property. The most common of these are:

(1) Problematic tenants

As a landlord, you will have to prepare a strategy to deal with tenants who do not pay rent on time. You may also have to be prepared to confront those who may make changes in your house without your knowledge.

(2) Emergency repairs

You are responsible for emergency repairs. You are in trouble unless you have a sound plan on how to deal with these repairs.

(3) Natural disasters

You will have to ask yourself if you can afford to rebuild your house following a natural disaster such as hurricane Sandy. Although housing insurance will cover a bulk of the costs, you will still end up spending more than you can imagine.

(4) Taxes

More rent income means more taxes. A large part of the monthly income that you get now will be going into your taxes

(5) Housing market and inoccupancy

Are you prepared to pay monthly mortgages for your investment property if the housing market starts marching south? What will you do if you fail to find a new tenant?

Unless you are prepared to deal with the above mentioned risks, it is perhaps a better idea to sell your rental property and invest the cash in more productive endeavors such as education and skill-development.

It is hard to sell an investment property, but it offers high profits. You can get an online value report on how much your rental property is worth. There are many websites that offer free home value reports, such asNeighborhood IQ. Taking that report as a base, you can put your property on sale. The government charges a higher tax on the sale of rental property. There is a way to avoid this if you want to stay in real estate after pocketing in the profits from selling your old property and investing the rest of the money into the new property.