Is Buying A Condo A Good Investment
Condos can be a good option for rental property buyers because they tend to be more affordable than comparable single-family homes, and they are often located in desirable locations . Additionally, condos often have fewer maintenance demands because owners aren’t responsible for taking care of the grounds or the building’s exterior.
Still, financing a condo can be trickier than getting a mortgage for a single-family home. For instance, most lenders require that at least 50% of the units are owner-occupied and that the homeowners association is in good shape. It’s also important to consider potential special assessments. You may be able to swing the monthly dues with no problems, but if the building needs, say, a new roof, you may owe a special one-time payment that could be thousands of dollars.
When To Sell An Investment Property: Every Indicator To Consider
Updated: by Financial Samurai
Are you wondering when to sell an investment property? Youve come to the right place. I have owned investment properties since 2003 and Ive also sold an investment property before.
I believe the best holding period for real estate is forever. By not selling, real estate owners ride the unstoppable inflation wave. Further, by holding on, you never have to pay any onerous commissions and long term capital gains tax. But forever is a long time.
10 years ago, I had the mindset of buying as many investment properties as possible. I wanted to generate enough rental income to never have to work a day job again. I was enamored with using other peoples money to buy a real asset that tended to appreciate in value over time.
Further, I loved receiving a steady rental income stream. I used the money to pay down my mortgage and invest. To capture 100% of economic benefits with only a 20% down payment felt too good to be true. Therefore, I pressed as hard as I could.
Today, as a father, I no longer have the same tolerance for dealing with tenants and maintenance issues. Funny how our attitudes change as we age. Dont believe for one second your attitudes about work, life, and money wont change either.
You Can’t Afford The Maintenance Or Needed Renovations
Maintenance and renovations are a constant cost of rental property ownership. Maybe you’ve been putting off maintenance because your tenant has been there for 10 years and never complained. But now they’re moving out, and you don’t have the funds for those neglected repairs and necessary upgrades before placing a new tenant. This could mean it’s a good time to sell to another investor in an as is condition and move on.
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Selling Investment Property Tax Calculator
Calculating the tax implications for an impending investment property sale can be a tricky endeavor, and should only be left to a trained professional. If for nothing else, there are too many moving parts for the average homeowner to understand whats at stake. However, if you simply want a ballpark figure of what to expect, heres a property tax calculator you may want to check out.
When You Begin To Exceed The $250k / $500k Tax Free Profit
The government allows you to pay zero capital gains tax on the first $250K in profits for individuals, and the first $500K in profits for married couples for your primary residence.
If youre hitting these tax-free limits, and youre still eligible for benefits if youve lived in your home for two out of the last five years, then you may want to consider taking the tax-free profits and buying a new place in a cheaper part of the country with potentially more upside.
To defer taxes, you can 1031 exchange your investment property by buying another investment property of greater value within 180 days. Youll first have to contact a 1031 exchange company to handle the exchange.
Itll cost you about $1,000 $2,000 for the optionality of doing such a transaction. If you cant find an investment property you like in 180 days, then youll eat the $1,000 $2,000 setup cost.
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Calculating Return On An Investment Property
There is no guarantee that your property will appreciate in value, but presuming you did your research and the property is in a desirable location, you can reasonably assume the value will hold, if not increase, by at least 1% per year. Economists suggest 3% to 5% is reasonable to expect, but conservative forecasting approaches are better to avert financial concerns down the road.
The return on your investment will depend on many factors, including fluctuations in the market, your costs to maintain the property , the amount of rent you receive, the interest rate you obtained on your loan, and the type of property it is .
Tax Effects Of Buying Real Estate To Sell For A Profit
When you sell your home you do not usually have to pay tax on any profit from the sale because of the principal residence exemption. However, if you buy a property with the main intention of selling it, you will owe tax on any resulting gain .
The gain on the sale of real estate is the difference between what the property is sold for and its cost. In some situations this is considered business income in other situations it is considered to be a capital gain.
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Buy Investment Rental Properties : Buy My Passive Income Rental Properties For Investment Opportunities In California
Hello, my name is Bobby, and I am an investor broker, and property manager of 25 plus years and I buy and Sell rental properties for clients as well as myself. I put properties under contract and either keep them for myself or sell them to qualified buyers. We serve the areas, of Simi Valley, Westlake Village, Agoura Hills, Calabasas, Malibu, Valencia, and surrounding areas of the greater Los Angeles County, Orange County, San Diego County, Santa Barbara County, and Ventura County.
We Sell Vacant, or Tenant Occupied quality properties, to investors, cash buyers, or retail buyers, that will typically live in the property. These properties are vetted and qualiied to be good investor or retail buyer investment proiperties, that go through an extensive due dilligence and inspection process covering the physical condition and insuring clean clear marketable title.
When The Joy Of Owning Is Less Than The Joy Of Doing Something Else More Important
The more money you make, the less joy you will experience collecting rental income. Its just like eating your fifth slice of apple pie isnt as enjoyable as your first.
Although rental income accounts for roughly 50% of my total passive income, net rental income accounts for less than 10% of my total income.
While Ill always feel proud driving by one of my properties, the concurrent joy I also felt has faded. Instead, I now view the properties as pure income generators, without the nostalgic memories. As soon as you can take emotion out of your investments, you become a better investor.
Other Selling Considerations For Landlords
- If youre thinking of selling an investment house or multi-unit dwelling soon, dont sign new leases. Youll get a higher price for your house if you are targeting both investors and end-users who want to live in one of the apartments themselves. Having a vacant apartment is an attractive feature for many Buyers.
- If youre NOT thinking of selling soon, increase your rents every year. The amount of rent your Tenant pays will directly impact the sale price of your house. Because the lease transfers with the property, a Tenant who is paying below-market rent will mean the new owner will take in less income than they would with a comparable property, and that will make your house less valuable . Always charge market rent to a new Tenant, and always increase rents annually by the amount allowed by law.
Landlords Selling An Investment
Landlords selling a property investment is slightly different from selling a home. For a start landlords are not living there and the property may be tenanted. First of all the landlord will have to make the decision on whether to try and sell the property with vacant possession or with it still tenanted.
The downside to the former for landlords is that the property will obviously be standing empty whilst a sale is attempted. This can be a significant drain on a landlords cash resources if they have a mortgage, as money is going out but no rent is coming in to pay for it.
Most landlords still prefer to go down the traditional route of selling a btl property through an estate agent. This has advantages to landlords over a purely investment sale where the tenant is still in residence in that the property is also being sold to the far larger owner occupation market comprising of over 70% of households.
The costs of selling by landlords through an agent begin at 1% for a small independent agent in a suburban location. More typically the rate would be between 1.5-2% for one of the larger national chains of estate agent. If a specialist marketing campaign for a prestige property is involved then it could be even higher than this.
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How To Avoid Or Defer Tax When Selling Your Investment Property
One way to defer the tax is to do a 1031 exchange. This IRS provision allows you to forgo paying capital gains tax if you replace the property you’re selling with a like-kind property within 180 days. In theory, you can defer this tax again and again by doing a 1031 exchange each time you sell an investment property.
And the good news is that the like-kind definition can apply to crowdfunded deals. You don’t necessarily have to buy another investment property outright. Fundrise, for example, is one of the leading forces in real estate crowdfunding.
Of course, there are stringent rules to follow to qualify. Flipped properties do not qualify for 1031 exchange treatment. And you will need a qualified intermediary to do the exchange and to escrow the sales proceeds on your behalf.
But a 1031 exchange can be a very useful and legal method of skipping the capital gains tax on an investment property you sell.
Is It Worth The Time And Money To Sell My Property
Selling a property the traditional way can take months and comes with a number of costs, like agents fees, conveyancing fees, marketing fees, and so on. To top it off, you also typically have to pay Capital Gains Tax when selling any property that isnt your primary place of residence. With this in mind, take the time to calculate what it would cost you to sell your property and decide whether its worth the time and money.
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The Growing Impact Of Rent Control Before And After Covid
While this may sound like hyperbole to some, our firm is actively working with numerous apartment owners across the country, and we hear firsthand some of the challenges and pressures property owners are facing. Even national media are picking up on this trend. For example, a recent Wall Street Journal article cites that apartment owners and investors are leaving California and the Northeast for places like Florida, Texas and the other Southern states where warm weather, business-friendly governments and laws, lower taxes and fewer regulations seem like a breath of fresh air.
However, even before COVID-19 rolled across the nations multifamily rental real estate investment market, landlords were seeing new rent-control legislation start to encroach on their investment real estate portfolios, and squeeze owners profits. When COVID-19 arrived in the United States, cities across the country started expanding rent-control laws and eviction moratoriums at an alarming rate, directly exposing landlords to financial peril. Legally speaking, the term rent control can be defined as any statutory rule that regulates the timing or frequency of increasing tenants rent, the services landlords must provide tenants, and the limited ability of landlords to evict tenants.
Find The Right Location
The last thing you want is to be stuck with a rental property in an area that is declining rather than stable or picking up steam. A city or locale where the population is growing and a revitalization plan is underway represents a potential investment opportunity.
When choosing a profitable rental property, look for a location with low property taxes, a decent school district, and plenty of amenities, such as restaurants, coffee shops, shopping, trails, and parks. In addition, a neighborhood with a low crime rate, easy access to public transportation, and a growing job market may mean a larger pool of potential renters.
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Selling An Investment Property Using An Online Agent
There are alternatives for landlords to using a traditional estate agent. In recent years there have emerged a number of Internet based property marketing sites which means increasingly landlords are asking the question do I need an estate agent or are there opportunities to sell investment property online. These sites allow landlords to advertise their properties directly to sellers without an agent as an intermediary. The online estate agents include :
Emoov, House Simple, Purple Bricks, Tepilo.
The Two Most Important Steps For Selling An Investment Property
Choose yourestate agent wisely
As always, makesure you get a good estate agent on board. Organise a few valuations to findout what your propertys worth and, when it comes to choosing the agent to sell your property, decide who youget on with best and who you trust to get you a great deal.
Many buy-to-letlandlords arent local to their rental property. If you dont live near theproperty youre selling, its even more important to find an estate agent youtrust. Theyll be hosting viewings and showing off your property, so you needto be sure theyll get it right. Here at YOPA we have local agents across thecountry, so if you are looking for a free, face-to-face valuation then .
Make it easyfor investors to see who their tenants would be
Whoever yourtarget tenant is, make it clear to buyers. If the property you own is rentedout to students, make sure the furnishings and décor reflect this easymaintenance is key, as a future landlord wont be looking to refurbish theproperty every year. Likewise, if your ideal tenants are young professionals,keep the interior light and fresh, as theyll want to put their own stamp onthe property. At this point, its important for potential landlords to easilyvisualise their target audience they want to know the property is going tomake them money, preferably as quickly as possible.
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Use Roofstock Marketplace To Sell Your Rental Property
No matter the reason youre selling rental property, Roofstock Marketplace can help you get the most money for it and make the process as easy as possible.Roofstock is a marketplace for rental properties. It brings together buyers and sellers, all with a similar goal to buy or sell investment properties.You dont need to handle hundreds of buyers walking through your home. The entire process is done online with the support of Roofstock professionals who make the process easy for you.
Benefits of Using Roofstock
Working with Roofstock puts you in direct contact with buyers looking for investment properties.
Here are some other benefits of using Roofstock Marketplace to sell your property:
- Large audience: With Roofstock, you target the right audience from the start.
- Get worldwide exposure: Anyone can use Roofstock and see the properties for sale.
- Continuous cash flow: You keep earning cash flow until you close on the property. You dont have to pay tenants to leave or deal with a vacancy.
- Roofstock does the work: A lot of due diligence goes into selling a rental property. Roofstock makes it easier for you to sell the property and easier for buyers to determine if its a good purchase.
- Low cost: Roofstock charges just 3% commission.
- Roofstock does the talking: You conduct all business through the Roofstock platform, and Roofstock does the talking to your buyers.
Your Property Ticks All The Hot Buttons In A Hot Market
Buyer preferences fluctuate. And homes that tick all the hot buttons buyers are looking for sell faster. If there’s a spike in demand for the style and type of your investment property, it may be time to consider selling.
The same is true for location. For example, if a specific area has become more popular because a metro station was built in the vicinity , it could be a good time to sell. You can find these kinds of deals at Origin Investments, for example.
The stock investor’s goal of buy low, sell high is also a recipe to make money investing in real estate. The housing market fluctuates. Consequently, there are good times to sell referred to as a seller’s market and good times to buy a buyer’s market.
Unlike investing in the stock market, where you can sell your shares the same day you choose to do so, real estate transactions take time to close because the process is more complex. That means you need to anticipate the market’s direction and start the selling process prior to the market top if you want to sell for top dollar.
> > Further Reading: How to Buy an Investment Property
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