6 Reasons Why You Should Sell Your Rental Property

Are you deciding whether or not to sell your rental property? Rental properties have long been regarded as some of the best investments in the personal finance marketplace, and the perks — like generating passive income, diversifying your investment portfolio, taking advantage of appreciation, and enjoying certain tax benefits — are certainly nothing to scoff at. But what happens when your personal financial situation or events on the global stage change dramatically? You may be tempted to pare down or sell off your rental portfolio entirely, but selling investment property is a gamble. There are many factors to consider before listing a rental property for sale, such as your personal financial situation, the local market outlook, the property’s maintenance needs, and property taxes. 

It’s completely normal to feel conflicted when deciding if you should sell your rental property or not. Luckily, there are few key signs that may indicate now is the time to act.

1. Your Rental Is Worth More Than When You Bought It

The number one goal of investing in rental properties is to generate income, but unfortunately, losing out on investments is quite common. If you find yourself sitting on a property that’s worth far more than the price you purchased it for, then selling might be wise. It’s also important to consider the fact that rental rates are unpredictable and can fluctuate in favor of the tenant rather than the owner, leading to a decline in your income.

Pro tip: Don’t rely on Zillow’s Zestimate! The best way to determine your property’s value is to contact a licensed real estate agent and ask for a comparative market analysis. The agent will analyze comparable properties that have recently sold nearby to determine a competitive listing price. If the value meets (or, fingers crossed, exceeds) the expected number, you might consider putting the property up for sale. 

Psst! Need an investor-friendly agent who can help you navigate the risks, challenges, and headaches of selling rental property in today’s market? Learn more about partnering with Evernest.

2. The Cash Flow Is Negative

Negative cash flow occurs when you’re spending more on your business than you’re earning from it. For some investors, negative cash flow may be a temporary roadblock, but in most situations, holding on to real estate investments in the hopes that the situation will improve is risky. 

Owners who delay selling properties with negative cash flow often end up hemorrhaging money each month. If this sounds familiar, you may want to sell your rental property. In most cases, it’s best to sell a negative-cash-flow property as soon as possible unless there’s absolute certainty that rental prices will go up.

3. You Can’t Afford Maintenance

As a landlord, it’s your responsibility to ensure that your property is habitable for residents. By keeping the property in good condition and staying on top of maintenance, you will keep your tenants happy and avoid violating any local habitability laws. Whether you choose to handle maintenance yourself or hire a property manager, the cost isn’t exactly negligible. And, of course, unforeseen issues can arise, like property damage on top of expected wear and tear.

Plus, many repairs can’t simply be fixed with your handy-dandy toolbox. From plumbing issues to landscaping, many jobs will require a professional, and just a few high-priced repairs can pack a punch. For example, foundation repairs can cost anywhere from $450 to $11,000, and a new roof could run you $6,000. At the end of the day, if you’re struggling to finance maintenance or pay the bills, selling your rental could be a good idea. 

Suggested listening: The 5 Traits You MUST Have to Be a Successful Real Estate Investor

4. It’s a Strong Seller’s Market

While it’s true that certain homebuying and selling seasons are busier than others, fluctuations in the real estate market have more to do with supply and demand than time of year. That’s why it’s critical to monitor local trends and determine whether you’re seeing a buyer's or seller's market. A seller’s market is characterized by high demand and limited supply. In other words, there are many interested homebuyers but very few properties for them to choose from. In a seller’s market, because there are fewer homes available, the home sellers are at an advantage. Homes sell faster because buyers must compete with one another for the property, and buyers are often willing to spend more on a home than they otherwise would have.

Pro tip: In a seller’s market, it’s more important than ever to analyze the bids received carefully. Sellers are frequently so focused on selecting the highest offer that they overlook each buyer's financial soundness. The last thing anyone wants is to accept an unrealistic or bad-faith offer and then have to re-list their home when the sale falls through, so keep this in mind if you do choose to sell your rental property.

5. Low Interest Rates

Mortgage rates fell to historic lows early in the COVID-19 pandemic. Low mortgage rates coupled with more time spent at home resulted in a highly competitive real estate market and a surge in demand for homeownership. Those low interest rates narrowed the gap between the cost of renting and the cost of buying, and more and more residents in A, B, and even C class neighborhoods opted to purchase their own homes as opposed to renting. As a result, some rental owners lost long-term residents to homeownership. Without reliable residents, some landlords struggled to maintain their properties. 

Although rates have increased significantly in the years since, under circumstances similar to those in 2020 and 2021, the benefits of selling your rental could outweigh the cons.

6. Being a Landlord Is Taxing

Taking on the responsibilities of a rental property is tiresome — we know that firsthand at Evernest. You have to look after the place 24/7/365 and might get requests outside of business hours that need attention immediately. Between troublesome residents, pending maintenance, fluctuating home values, and even natural disasters, being a landlord can certainly take a toll. If you’re consistently stressed about maintaining a proper living space for your residents, have had enough of difficult renters, or haven’t signed on with a world-class property management company (ahem), it might be time to say goodbye. In this case, selling the rental property may feel like a massive weight off your shoulders. 

Pro tip: If you’re over the maintenance but aren’t ready to sell, consider hiring a property manager. We’ll help you navigate the risks, challenges, and headaches of buying, selling, or managing rental property in today’s market. Learn more about partnering with Evernest!

Final Thoughts on Why You Should Sell Your Rental Property

It’s important to remember that determining whether or not you should sell your rental property is a personal decision. The right answer will depend entirely on your goals, outlook, financial situation, local market, and the property itself. An investor-friendly agent will be key in helping you weigh the pros and cons and come to a decision. Lucky for you, we know some people!

Sell Your Rental Property With Evernest

Whether you’re selling five properties or 50, you don’t have to go it alone. If you’re ready to sell your investment property, here are three steps to get started today:

• Get an investor-friendly agent: We can help with that! We would love to help you sell your rental property.
• Subscribe to our podcast: The Evernest Real Estate Investor is the go-to podcast for all things real estate investing, being a landlord, buying and selling properties, and more.
• Find lucrative deals: The Nest, our newsletter for investors, packs all the industry knowledge you need along with a great listing each week so you can focus on what matters most, from spending time with family to growing your portfolio.