Selling Investment Property: 7 Signals It’s Time
You want to factor in all the costs of selling when evaluating whether it makes sense to sell or bangkok condo not. Under the current tax law, if you have owned an investment property for less than a year, your gain is taxed at your current income tax rate. You’ll also need to pay tax on “depreciation recapture” when you sell a long-term investment. When you sell an investment property, your profit or gain is subject to either short-term or long-term capital gains tax. Long-term investments are typically taxed as capital gains at 15% or 20% depending on your tax bracket. Depreciation is a tax deduction you take annually when you own an investment property.
You don’t necessarily have to buy another investment property outright. And you will need a qualified intermediary to do the exchange and to escrow the sales proceeds on your behalf. Flipped properties do not qualify for 1031 exchange treatment. Fundrise, for example, is one of the leading forces in real estate crowdfunding. Investing in real estate can lucrative. Of course, there are stringent rules to follow to qualify. But a 1031 exchange can be a very useful and legal method of skipping the capital gains tax on an investment property you sell.
Things can happen that increase your ownership costs while you hold an investment property. If your return on investment on a property has been declining, it might be a good idea to sell and purchase a different property in a better location that’ll have better cash flow and profitably. His reason for selling? I’ve been helping an investor who is, one home at a time, liquidating his rental property portfolio. Rapidly rising property taxes can be a signal to sell. Or maybe there’s a pending special assessment from your condo or homeowners association that will decrease your cash flow significantly when it is approved.
It’s important to understand that owning rental properties is a long-term strategy, referred to as “buy and hold.” Homes appreciate over time, not overnight. Still, like any investment strategy, it’s prudent to regularly evaluate your holdings and determine whether you should continue to hold or sell. Since the transaction costs of buying and selling real property are significant, you don’t want to be “trading” in and out of different rental properties. If and when you sell a particular holding is a business decision, and you’re in the business to make money. That requires you to frequently do a cost/benefit analysis and determine where your investment dollars are most profitably employed.
