It might be time to sell your Cleveland investment property.
Or, maybe it’s not.
How do you know for sure?
Right now, the market is absolutely trending in your favor. Even with interest rates creeping up slightly and things feeling a little less fast-paced than they were a year ago, it’s very much a seller’s market. Right now, you’re set up to receive the highest possible asking prices.
If you’re looking for some immediate equity and you know you can sell your house quickly, now is probably the time to sell.
But, there’s always a good reason to hold an investment property. After all, there’s recurring rent to earn. Tax breaks. Increasing home values.
Knowing that it’s time to sell your Cleveland property may be absolute. If it’s not so absolute, it will depend on several factors. Why are you selling, what do you hope to gain, and what are you planning to do with the proceeds from the sale (which may be taxable)? These are all questions to ask.
As we explore the topic of how you know when it’s time to sell an investment property, we want you to remember that every investor has different goals. What works for others may not work for you. We’d be happy to take a specific look at your own investment property and your unique situation to give you some guidance on what’s best for you.
Cleveland Real Estate: Should You Sell Now or Wait?
The market will support you selling your investment property right now.
But, ask yourself why you want to sell. Is the property just not working for you anymore? Are you hoping to buy something else? Are you looking to diversify?
The answers to those questions will help you decide if you should sell now or later.
Don’t make any decisions without examining how much equity you have in your home right now. You’ll need to know what you’ll be looking at in terms of earnings if you do sell. Consider whether you’ll have to put some work into the property in order to get the highest price or if you can comfortably sell it as-is. How much are you willing to invest in order for the sale to be profitable for you?
Here are some good reasons to sell right now:
The Cleveland Real Estate Market is a Reason to Sell
It’s not always easy to get the price you’re hoping for when you list your property for sale, so when the market is in a position to give you what you want, it’s a great time to sell.
Investors never release an asset until they feel they have made all the money they believe they can. If it’s time to move on and the market is in a strong spot – sell.
In the last few years, you have likely seen your investment property rise in value. You’re in an excellent position to sell either to another investor or a homeowner looking for a place to live. Don’t wait for the next downturn; sell when there’s money to be made.
Sell When the Property No Longer Serves You
If you are having trouble keeping tenants because the neighbors are awful or there is a lot of commercial activity moving into the neighborhood or traffic has become a nightmare, you should consider selling the property. If the property is not increasing the size and strength of your real estate portfolio, you don’t need it.
Maybe you just don’t want the property anymore. You don’t want to live there and you don’t want to rent it out. You simply want to be free of it. That’s a good time to sell.
Sell When the Home is Expensive or Time-Consuming to Maintain
Maintenance is not getting any cheaper. Nor is it getting easier. When the maintenance and repairs required on your Cleveland property have become too much to deal with and too expensive, you should sell. If it’s a minor fix that’s needed and you otherwise find your property to be a good investment, make the repairs and move on. However, if the repairs are frequent and the house requires more than you can possibly provide, it is time to move on.
Seasonal Considerations When Deciding to Sell in Cleveland
This is Cleveland, and our seasons are pretty specific.
Winter is not the best time to sell your investment property. You have tenants in place, no doubt, and moving them out might be more challenging than in warmer months. If you’re going to sell with tenants in place, you have a bit more flexibility.
That doesn’t mean you should overcomplicate your own sales process or the lives of your tenants.
There are several factors that contribute to seasonal sales shifts. Generally speaking, sellers have been able to sell their homes faster and for more money in the spring and summer. A lot of this is driven by weather. No one wants to move in the winter when there is snow and ice.
School schedules also play a factor. Families with children are more likely to move when school is out. They’ll want to be settled into their new home before school starts again. May and June are excellent times to list your home, especially in Cleveland.
If you’re flexible on when you sell your investment property, wait out the winter. Get through the holidays. Spend some time making whatever improvements you need to make and talk to your tenants about their plans and yours. Plan to list the home in spring for maximum leverage.
Interest Rates and Home Values
Seasons aren’t the only shifts to pay attention to. You also want to consider interest rates when you’re preparing to sell your home.
Interest rates will always impact the demand for homes in Cleveland and whether buyers are willing to take out loans and mortgages. When interest rates rise, there tends to be a slowdown in the number of buyers who are willing to take out a mortgage and close on a home.
Right now, home values are high and interest rates, while rising, are still historically low. This is creating a unique market that makes it a good time to sell a home in Cleveland. Your buyers are still getting excellent rates on their mortgages, so they won’t be put off by the prices that may be higher than they anticipated.
Selling when interest rates are high and home values are low is never fun. Don’t wait for that market. If you’re ready to sell – sell now.
Why Sell When You Can Trade?
If you are thinking about selling but you’re not ready to exit the market, consider a 1031 exchange.
This is a tax resource that’s named for Section 1031 of the IRS code. Property owners can defer the taxes that may be due on the sale of a property by investing those profits into the purchase of another property.
Owners know that when they earn a lot of money off the sale of a rental property, there are capital gains taxes to pay. But, if you’re willing to use the proceeds from the sale of your property to buy another income-producing property, you won’t lose any of those proceeds to taxes.
Some things to know about the 1031 exchange:
- You have to exchange like properties for like properties when you’re taking advantage of this investment resource. So, you cannot sell a rental property and avoid taxes by purchasing a vacation home for your family (although that would be nice). Instead, you need to buy another income-producing property with a value that matches or exceeds the property you’ve sold.
- There are also deadlines. If you’re going to do a 1031 Exchange, you have to identify the property or properties you want to buy within 45 days of closing on the property you sold. You also have to close on the new deal within 180 days of selling the original property. The entire transaction must be completed within those 180 days, otherwise you’ll be liable for taxes.
Often, a 1031 exchange is a better option for investors than selling an asset and walking away from the market entirely. When you do a 1031 exchange, you can defer your taxes and strengthen your portfolio while getting rid of a property you don’t particularly want to keep.
Surround Yourself With Cleveland Real Estate Experts
When you’re deciding when and how to sell your property, it’s a good idea to get some professional help.
Partner with a Cleveland real estate expert, and you’ll have access to resources and market knowledge that will help you make better decisions. You’ll also be able to maximize your home’s final selling price with all the recommendations that your agent provides. You can talk about timing and whether there are better options than selling right now.
An experienced local real estate agent can be your best option when you’re trying to achieve the best outcome. We would be happy to talk through all of your options with you. If you have any questions about how and when to sell your Cleveland investment property, please contact us IIP Management. We work with owners in Cleveland Heights, Lakewood, Lyndhurst, Parma, Solon, and South Euclid (Cuyahoga County).