Are you thinking about selling? Best to consider these factors and avoid the following traps.
1. Profit has been maximised: When a property has reached maximum value, there is little value in holding onto it for longer. Do not wait until the market is turning downward. Then all you are doing is lowering the price to try and catch a buyer. Therefore, the upper part of the appreciation curve is generally considered the optimum time to sell.
2. Property has not performed: Having cash or equity tied up in an investment that has not performed (over a reasonable time period) can prevent an investor from reaching their financial goals.
3. Better opportunity elsewhere: Investors should know how each of their properties are performing relative to
a. Others in their portfolio
b. Those in the market place.
If another opportunity presents itself with greater investment prospects then it should be considered.
4. Depreciation has been maximised: Depreciation on a property lasts for up to 30 years or whatever your accountant set up) from the time of purchase. Over time the value of depreciation recedes. This could weaken a property’s cash-flow position to the degree that it becomes better to sell.
While a forced exit can cause investors to panic and make easily avoidable mistakes, there are a number of traps that any investor wanting to exit a property needs to be aware of, according to experts.
-Selling too soon – before the market has started moving. This can impact on capital gains and, thus, the profit made.
-Holding for too long until demand has dropped off and the market is going down. This can prolong the sales process and result in a lower price.
-Selling to buy in a rising market, but then sitting on the sidelines. If an investor sells in this scenario, they shouldn’t then neglect to buy a property as intended.
-Forgetting to factor in selling costs (eg: agent commissions, legal costs and the like).
-Cross-collateral implications with lenders: Selling might trigger the need for valuations on other properties in a portfolio. This, in turn, could impact on the value of the portfolio.
It is important to contact all your financial partners such as accountants, bankers, lawyers or anyone who has set up your will or trust account. Remember a licenced Real Estate agent is always your best friend when determining value. Feel free to call Nancy Mikoda at 720-331-2444 or email firstname.lastname@example.org for further information.