Signs it’s time to sell your investment property

reasons to sell your investment property

You probably bought your investment property for the right reasons. You may have made a judicious choice – at the time. But things change, and what worked well for you last year might have become a drain on your finances or your time. The decision to sell is always a difficult one, but it is one that you might have to make.

How do you know, if you have any reasons to sell your investment property?

Perhaps it’s time to take stock and consider what constitutes a good investment and whether your property is really hitting the mark. Here are our 7 signs you may need to sell:

1. What is a sound investment?

Some of the issues with your property may have been causing you difficulties from the outset rather than creeping up on you over the months and years. Perhaps you should sell up, not because your investment has become troublesome, but because it wasn’t the right choice in the first place?

2. Is your property profitable?

The answer may not be as obvious as you think. Have you accounted for the attendant costs before assessing whether your investment or potential investment will yield a healthy return? What interest are you paying on any capital you have borrowed? How much is your insurance policy setting you back? What are the costs of maintaining the property and how much might you have to spend to market it to tenants?

Add up the overheads associated with your investment and deduct these from the rental income that you can realistically generate. Are you yielding sufficient profit to warrant holding on to the property? Could you invest the same amount of money elsewhere and enjoy better returns?

3. Is there sufficient demand for your property?

You may be seduced by a house or street, but that doesn’t mean that renters will be. Desirable neighbourhoods, transport links, and local amenities will all attract tenants to your property. It can help if there is a large employer nearby, such as a hospital, and if you are targeting families, they will be looking for homes in the catchment areas of good schools. You can spruce up a house or apartment, but you can’t change where it is.

Is your property likely to attract good tenants or will you be facing regular void periods? The harder it is to find tenants, the more you may have to spend on marketing the property and you might have to consider lowering the rent. It’s a lose-lose situation.

reasons to sell your investment property4. How does the property impact your time?

You have probably become a landlord because you are looking to generate extra income and enjoy a better life. However, your lifestyle is unlikely to fill you with joy if you are spending all your available time managing your investment. Is your property too far from where you live, is it ridiculously high-maintenance, or does it consistently attract troublesome tenants?
If your investment is eroding your time and impinging on your quality of life, it isn’t a good investment, even if it delivers an acceptable yield.

So, how do you know when the time has arrived to sell your investment and move on to better things? It’s always useful to examine your assets to establish whether they really are assets or simply burdens that are dragging you down. The truth may lie somewhere between the two, leaving you with an awkward decision. But it is never a good idea to continue with the status quo without knowing what that is.

5. Dwindling or non-existent profits

There’s never a bad time to do the maths. You must keep abreast of your financials. Often, problems don’t arrive suddenly to put a sinkhole through your profitability. They are more likely to creep up on you gradually.

A small increase in maintenance costs becomes a bigger one over time. Void periods become more frequent or the cost of your borrowing nudges up year on year. There could be several factors which combine to raise your costs to the point where your yield disappears. Each of these could seem insignificant but the cumulative effect will have a devastating impact on your profits.

6. You’ve relocated

If your investment is close to home, it will be much easier to manage. Perhaps it was close to where you live when you bought it, but now you have moved on?

You might have been thinking that your rental income would fund your escape to the country, but what if your escape to the country is preventing you from managing your property?
Those calls from your tenant requesting repairs suddenly present a problem and you can’t build a relationship with your tenant because you are never there. What if your tenant is damaging your property or sub-letting it? You wouldn’t know.

7. Inadequate yields

You might be happy with your rental income, but that doesn’t mean that it couldn’t be improved or that you aren’t able to make your capital work harder for you.

It is always worth investigating what you should be achieving in your area and whether you could do better with a different kind of property. Could the 8% yield you receive from your three-bedroom house become a 12% yield if you bought two apartments instead?

Perhaps the best advice we can give you is to keep your eye on the ball. If you don’t know how well your investments are performing, you can’t possibly make an informed decision as to their future. If you are going to sell, do it before your property becomes a drain on your resources.