The simple answer is, it depends.
If you purchased real estate as an investment, you most likely want to maximize your returns. Having an investment property can be a smart idea, as it can be a source of revenue from rent and can be an appreciating asset. However, owning an investment property can pose a large risk to you in the form of maintenance and remodeling costs, bad tenants and market volatility. If you are planning on selling your investment property, you need to take market trends, personal goals, and other factors into consideration before placing your property on the market. By looking at these factors you can determine whether or not the time is right to sell your investment property.
This year may be a great time for investors to sell their investment property, as the NAR reported that median investment property sales were $155,000 last year, 8% higher than 2015 prices. In addition, Redfin predicted at the end of 2016 that median home prices will increase 5.3% this year, indicating a positive trend. Forbes credits tight supply and an increase in new homebuyers as the drivers of price increases in the short term. This increase in demand is being driven by low unemployment rates, increases in the median wage, and the influx of millennial buyers. However, many potential homebuyers are unable to afford a house, due to a housing shortage, driving many to rent housing. This trend may encourage investors to hold on to their investment properties as more millennials become renters.
Your overall goals and financial plan can also affect your decision to put your investment property on the market. Do you need extra income? Do you want to maximize your returns quickly? If you need the money for significant expenses like college tuition, or other costs, it might be wise to sell the property even if the market is not at its peak. On the other hand, investors can hold on to their investment properties as a source of second income. In addition to generating passive income, potentially indefinitely, that property poses a much smaller risk to you once the mortgage is paid off.
If you are considering selling your investment property, you should take into consideration other factors in your local housing market. If your city is currently in the process of building new apartment complexes, schools, and other infrastructure, it might indicate a future influx of new homebuyers or renters, which might influence whether it’s a good time to sell or to hang on to your property. If your investment property is in a high demand location, your property may appreciate faster than the national average. A local real estate professional may be able to provide you with some insight into the value of your particular property.
By keeping in mind market trends, personal goals, and other factors, you can determine the best time to sell your investment property. The most important thing you can do aside from researching the market is to plan well for the future and make sure you have a plan even after you sell your investment property. It may be wise to seek the assistance of a professional financial advisor to construct a plan that works best for you. Consulting a licensed mortgage loan officer about the mortgage industry, as well as the current and anticipated interest rate environment may also be beneficial.
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