If you own a rental property, chances are that you have considered selling the property rather than continuing to rent it. Many factors go into making such a decision, including financial and personal concerns. On the financial end, you might decide to sell if the value of your property has increased, or if the rental market is saturated in your area. Personally, you might want to move away, retire, or head in a new direction professionally. Every individual’s circumstances are different, but anyone who has tried to make such a decision surely has reasons to sell or not to sell. Make sure you consider these issues when making your list of pros and cons.
Taxes: As Benjamin Franklin once wrote, “In this world nothing can be said to be certain, except death and taxes.” You probably can’t avoid paying taxes (not legally, anyway), and so the goal isn’t tax avoidance so much as tax advantage. If you’re going to make a profit on the sale of your rental property (i.e. you’re going to get more money for it than your initial investment), then you’re looking at paying capital gains taxes. How much you pay in taxes depends in large part on how much planning you do in advance. If you are not a distressed seller and you expect to make a profit, it is wise to sit down with an accountant or finance professional to see what your options are.
Market: How are housing prices in your area? Is it a buyer’s or a seller’s market? If house prices are going up, up, up, then it might be a good idea to sell, sell, sell. After all, prices are unlikely to rise forever. But it’s important to get a good feel for the housing and rental stock in your area. In some places the demand for rentals is higher than others, and if your property is in a place where demand is high but stock is low, it could be more advantageous to hang onto your property and keep renting it.
Career: However, even if the rental market is hot in your area, you might be deciding that being a landlord isn’t for you. It’s a role that requires a good balance of financial and personal skills. Of course, not everyone who owns rental property plans a hands-on role when it comes to managing the property. You can hire a property manager or management company to deal with the day-to-day. Of course, this only makes sense if you can afford it. But for someone with a number of different properties or rental units, outsourcing this role could be a huge help. For example, a property manager deals directly with tenant issues, collects rent, cleans vacated units, deals with security deposits, and handles maintenance. If you only own one home that you rent, then hiring a company probably doesn’t make sense. However, if you live far away from your property you could hire a single employee to take on the landlord responsibilities on your behalf.