Disposing of Your Real Estate Asset
Many real estate investors use income property as a way to generate long-term positive cash-flow. An income property can be used as a hedge against more high risk investments and provide the leverage for purchase of other income properties – so you can get busy building that empire. But what happens when you need or want to sell an income property? When is a good time and how should you go about it?
Of course, you can attempt to sell your residential or commercial investment property on your own, but since you're reading this guide, we assume you plan to enlist the skills of a seasoned real estate agent! Our brokerage is experienced in selling income properties; we have access to a pool of potential buyers, and other agents who represent potential buyers, for your property. We also possess the appropriate knowledge of Alberta landlord-tenant legislation, municipal by-laws, financial statement preparations, closing costs, and a strong sense of the market value for different properties in different areas.
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We would be happy to consult with you and give you honest, professional advice about such things as:
- Readying the property for sale: getting it in marketable, rentable condition if need be
- What cosmetic repairs and improvements you can make (like installing new carpet, appliances, painting, landscaping) to make it more appealing for tenants and thus an easier sale
- Comparable sales of similar income properties (those with similar floor plans, the same number of bedrooms and baths, and comparable square footage) in the same geographical area as yours, that are currently for sale or have sold recently
- A professional opinion of value that will help you determine how much to list your income property for, as well as an estimate of how long it will take to sell
- The merits of getting a professional home inspection (appraisal)
- How to time the market and calculate whether now is a good time to sell, or if you should wait for better local or macroeconomic conditions
- Preparing all the appropriate financial statements that will be requested by potential buyers.
Key Factors to Consider When Selling an Income Property
We know there are many personal situations that may lead you to decide to sell your residential income property. You may have reached your investment goals and want to cash out; you may be moving to a new job, or have run out of time to devote to the upkeep of your property and the responsibilities of being a landlord. Perhaps the neighbourhood is changing and you're having a hard time attracting tenants; or you want to simply retire and live the Canadian dream. Whatever your reasons, before we put a sign on your lawn, we will closely examine the following factors to make sure you make the most of your income property sale.
Is it the right time to cash out your investment? You may need access to the capital that is in your property, but selling your income property may not be your only option to raise the desired funds. As part of the examination of whether you are in a good position to sell, we will look at the tax implications of selling.
Is there a strong rental market in your area that makes your property attractive to investors? How does your property compare to other rentals in the area? We'll do the research to see how yours stacks up.
How does the overall real estate market in your area compare to other forms of investments? Is your money working best for you owning this property, or would other investment vehicles such as stocks, bonds, mutual funds or money markets produce a better rate of return?
What price range are you comfortable with achieving when you sell your income property? Be clear on what is the lowest dollar amount you will be happy with, taking into account all your selling costs and what you have put into the house already, to arrive at a net figure you can live with contentedly.
Do you have a plan in place to put the proceeds from your income property into another investment? Remember, the whole point is to keep your money working for you all the time.
How much have you built up in your income property? Does it make sense to have your tenants continue to help you build more equity by making those mortgage payments for you for a while longer, or have you enough equity to make it worthwhile cashing out? We'll help you determine if you are prepared to offer a seller take-back mortgage to a buyer, or if you will need all of your available equity in the property.
If you have purchased another income property, will it be possible to port your existing mortgage to it – or blend mortgage rates if rates are good? The mortgage professionals at Calgary Real Estate™ would be happy to discuss your options with you
3 Responses to Selling Income Properties: Sell Now or Wait?