Selling Your Home as an Investment Property

by Nancy Brenseke 07/12/2020

Photo by fran hogan on Unsplash

If you’re a homeowner considering selling your home as an investment property, timing is important. From a financial perspective, just as you probably bought strategically, you want to sell strategically too. The trick is knowing when the right time arrives. Here are four common metrics people use to determine when it's time to sell their property.

Amount of Equity in the House

A primary factor to look at is how much equity is in the home. Ideally, to sell a home as an investment, the seller can make a tidy sum. If mortgage payments are still owed, this may negate any potential profit made, but not necessarily. If you're looking to broaden your investment portfolio, be certain you can sell your house for enough money to pay off your debt with a sufficient amount left over to re-invest. If you don’t have enough equity to do this, you’re better holding off.

Market Conditions Are Good

Many owners who bought low and can sell high find this to be a strong motivator to put their property on the market. Since market conditions eventually shift to a buyer’s market, it’s a smart strategy to sell when the housing market favors the seller. Owners who have held their property for a long time or purchased as the housing bubble burst between 2007-2012, are likely going to make a better profit than investors who purchased when prices were at their peak.

Tax Code Advantages

Buyers are often motivated to sell if there are tax code advantages. For instance, the IRS currently offers a tax-deferred advantage to investors looking to sell one property to buy another. Under tax IRC Section 1031, sellers are required to find another property to purchase within 45 days and then buy it within 135 (180 days total).

By selling and making a similar real estate investment, investors can defer paying their federal and state capital gain taxes. It’s a good strategy to use if you want to leverage real estate and broaden your portfolio.

Taxes Are Going Up

If local taxes are going up, often buyers find this to be an incentive to sell. For instance, if a town severely limits commercial activity, the tax burden falls to homeowners. Over time, the tax bill may become too exorbitant. If you own enough equity in your property and the housing market is in your favor, high taxes might be your tipping point.

About the Author
Author

Nancy Brenseke

I love the ocean, sand and sunshine! That's why I call Hilton Head Island/Bluffton my home! I relocated to Hilton Head Island over 20 years ago from North Carolina after graduating from East Carolina University - Go Pirates! I continue to be successful in real estate for the past 13 Years and with my experience working with top resorts and gated communities, I have cultivated attention to detail, understand the importance of listening first and have the positive "Can Do" attitude in all situations. I offer my sellers and buyers the BEST advice to achieve their real estate goals. I enjoy spending time with my family boating on the May River, attending festivals along Old Town Bluffton and building sandcastles on HHI beaches.  

"Nancy Brenseke is the type of realtor that everyone should contract to sell their property. She is very knowledgeable and gave us valuable information when listing the townhome. The whole process went smoothly and Nancy was responsible for that. She always communicated with us which kept us confident that all aspects of the closing were under control and on track. I highly recommend Nancy Brenseke." ~ Deb Bluffton, SC

"I would highly recommend using Nancy for your real estate needs. She is extremely knowledgeable and responsive. Nancy's representation is top-notch." ~ Jill - Nashville, TN

"Nancy went the extra mile on everything around selling the condo. I would use her again and would recommend her to anyone I come in contact with. Our condo sold in 1 day! She was excellent and hardworker. She helped in all aspects of selling, from marketing with great number of pictures, to home inspection with helping us find contractors to fix the inspection issue so were were able to close." Eric - Cumming, GA