# knowing when to sell you rental property....



## sinfullivingsolution (Jun 1, 2015)

hello to all the forum posters 

first off; Ive enjoyed reading several years of the real estate threads, and look forward the rest of the site.

Im at a cross road with my rental property. it has done well for me since purchased in 2008, nearly doubling in value as per the current market. I make positive cash flow with a 3 unit building. since purchasing there have been no major capital costs but just minor repairs. its in a poor area of the city. it has 1 3 bedroom apt and 2 1 bedroom apartments. the one bedrooms tend to have tenants that stay on average a year long. Ive found that 1 beds in this area have transient renters. capital cost may ensue in the next coming years(a new flat roof).

coincidentally, all my tenants are leaving this summer which brings me to the crossroad. take the money and run, or rent it out again?

Ive learned a lot from this experience, especially the importance of location and long term tenants. hence why I wanted to purchase a bungalow that was already an existing duplex or could be renovated to accommodate the second space(Im handy that way). I have no immediate need to do this, since the market is so over inflated and I have other projects I could occupy myself with.

please your thoughts


----------



## OurBigFatWallet (Jan 20, 2014)

Congrats on the gain, what part of the country are you in? I'd also be curious to know what your tax situation is like; do you have a steady income apart from the rental income? I ask because you'll have a capital gain on the sale, half of which is taxable. If you had a fluctuating income you could time the sale for a lower income year (and pay less taxes). 

Another thing to consider - is there a mortgage and if so have you determined if there is a penalty if you sell?

You say the market is overinflated; you'd obviously be comfortable selling but would you be comfortable buying a bungalow when prices are so high? 

And finally, it sounds like you don't actually need the money right now. And it doesn't sound like it would be too difficult to find tenants in the summer. Would it make sense to hold on for another 1-3 years and then consider selling?

Just some food for thought. In my experience it's almost impossible to time the market and in some cases the best course of action is to do nothing


----------



## Just a Guy (Mar 27, 2012)

You know, I used to have these same thoughts every time I had a vacancy. I always used to fear I'd have problems filling the place, or get a bad tenant, or just thought I should wash my hands of the whole thing...

Then, I looked at the ROI of the property, the fact that it required very little of my time generally (especially when I looked at what I was being paid for my time) and I always went and found another tenant.

I invest in the markets, I own businesses, all of which make money but real estate makes me more money out of very little of my own money on a consistent basis than any other investment usually. 

Of course now I wonder if I should cash out, wait for the collapse and buy back in...

So generally, I'd look at refinancing to tap the equity and keep the properties I own while buying in on the future collapse.

In real estate you can sometimes have your cake and eat it too.


----------



## sinfullivingsolution (Jun 1, 2015)

OurBigFatWallet said:


> Congrats on the gain, what part of the country are you in? I'd also be curious to know what your tax situation is like; do you have a steady income apart from the rental income? I ask because you'll have a capital gain on the sale, half of which is taxable. If you had a fluctuating income you could time the sale for a lower income year (and pay less taxes).
> 
> Another thing to consider - is there a mortgage and if so have you determined if there is a penalty if you sell?
> 
> ...


thanks for your reply.

the property is located in ontario.

I do have a steady income from a full time gig which provides a comfortable lifestyle. I understand for the most part about capital gains(I need to have a sit down with my accountant) and was pondering the idea of taking a leave of absence from my full time gig(to pursue other interests) so that I can pay less tax.

I never considered the penalty for ending the mortgage early. I renewed a 5 year in 2012. Im assuming this could also be an expense for taxes. I will check with the bank in regards to this.

Im not to concerned about purchasing at the moment. I can wait, and I do have other interest I could pursue. Im a big fan of money; but when I see distressed property going 50k over what it should Ill wait. example. 2 years ago across the street from my primary was a dated home was purchased for 176k. that same house 2 days ago sold for 235k with no updates. I was thinking about selling my rental and primary and running. taking the proceeds, buying acreage and taking a leave of absence and pursuing interests. between the 2 possibly netting 250k, which is a good chunk of change considering time and effort that I put out.

I could wait 1 - 3 years, but I look at the headaches and possibly the capital repairs and I get itchy. I know timing the market is next to impossible but knowing the inflated market makes me a bit giddy.

thanks for your reply


----------



## sinfullivingsolution (Jun 1, 2015)

Just a Guy said:


> You know, I used to have these same thoughts every time I had a vacancy. I always used to fear I'd have problems filling the place, or get a bad tenant, or just thought I should wash my hands of the whole thing...
> 
> Then, I looked at the ROI of the property, the fact that it required very little of my time generally (especially when I looked at what I was being paid for my time) and I always went and found another tenant.
> 
> ...


thanks for your reply.

oh fear has nothing to do with my decision. Id rather let a unit sit empty for a couple of months then just rent to any person with the right amount of money.

ROI. I was dabbling with online calculators but lack the knowledge to properly use it. my property requires little time and effort on my part. Im a firm believer that if you take care of something well, you dont have to put out that much effort. when all is said and done my expenses are 7600 with a gross income of 29000 if I have no vacancies for that year. that figure does not include the mortgage or interest paid. that being said the mortgage is squat.

this is the funny thing about my area. 3 years ago my building was appraised and I was surprised how little it was appraised for. so when I look at that appraisal and the equity that I have its not significant as compared to cashing out. I believe currently I could squeeze out 80k(a guess) versus selling and doubling the purchase price(minus gain, etc).

thanks


----------



## Cal (Jun 17, 2009)

I use the comparison, if I were to sell, how much would that get me, and if I were to use that $ to invest in dividend payers, would it provide a better income stream.

Whether the place is rented or vacant is not a factor for me.

As the dividend income has preferential tax treatment vs rental income, if I can get some solid companies (not high dividend payers, or anything too risky, generally it averages to 4-4.5%) that would provide better cash flow than the property, I sell.

I am in no way against rental properties, great use of leverage, and great way to get other peoples money to increase your net worth.


----------

