Each year I suggest that real estate investors evaluate their holdings to determine if they should sell their investment property. In todays show, we will cover the basics of this effort so you can decide if 2023 is the right time for you to sell your investment property.
Step 1: Emotional vs Rational Motivations
Don’t underestimate the power of emotional motivations. In fact, do not disregard them. If keeping a property gives you a great deal of pleasure, but not so much money. The peace of mind from keeping it might just be worth it.
Step 2: Run The Numbers
Figure out what your return on investment is. Now there are two ways of looking at this. How much cash you have actually put into the property vs how much equity is currently in the property. For the purposes of todays show, we will be assuming we are talking about the equity you have in the property.
Step 2.1: Make Sure You Are Including ALL Expenses
When running your evaluation, you need to take into consideration ALL of your expenses. This includes any special assessments – something many investors forget to factor in.
Step 3: Make Sure To Use Real World Replacements
Once you have calculated your return, you need to identify realistic properties that would product better returns. Your goal should be to perform better than an indexed stock portfolio. That number is usually 10% minus whatever inflation happens to be. Of course, you need to also understand how much appreciation factors in to your property.