You will find lots of good and convincing reasons to invest in residential rental properties – you get another house, you can pay the mortgage through rental payments, and you receive fixed income on a monthly basis. Who would not be excited by the idea of being a landlord? Though, you might not be aware that getting tenants in your property is just the beginning of the story.
On the other hand, you might not be achieving your set target, you might be just breaking even, and it’s worst if you might be losing money. If that is the case, then you must understand the reasons behind the distress that rental properties cause and when it is the best time to sell a rental property.
You Invest in Expensive Property
Considering the fact that big rental houses in Pakistan are in high demand, you might have invested your savings and availed loan for purchasing a bigger house. Though, in the real estate world, the secret of making a profit is ‘spend as little as possible’ when you purchase an investment house. If you already pay too much, you will be burdened by an oversized mortgage for years, due to which you might make less than the expected amount in terms of the rental amount and quite less when you intend to sell.
When you decide to buy a rental house, perform the due diligence before making payment, and look at affordable possibilities as it has a bigger profit margin.
Higher Turnover
If you choose to purchase a rental property in Pakistan without consulting any real estate agent, you might end up choosing the wrong property. For example, a particular property might look attractive to you, but it may have basic issues, which you cannot identify by yourself, but it can later cause problems for you, such as frequent turnovers. It will absolutely increase your expenses. You need to discover these issues and address them in order to lessen the turnover rate. Whenever a tenant leaves, you must ask him to tell you about genuine reasons why he is leaving.
Spending too little on House
You might not agree to it, but it can be the reason due to which you are not able to make the most from your rental house. You might be losing cash because you are not putting adequate money into your rental property, such as on renovations and necessary repairs. It will also prevent you from charging a reasonable amount from your tenant. Consult an expert interior designer to know about house improvement projects such as washroom fixtures, kitchen remodeling, and few additions to exterior. These add-ons will assist you to grab higher rental Returns over Investment.
Spending too Much on House Upkeep
Remember, there is a fine line between underspending and overspending, and you must not fall on any side of this line. You might be spending a lot on your house upkeep, due to which you are not making enough from your property. You should pay for regular cleanings and normal upkeep, but you should not treat your house like a million-dollar property.
The Property is not Performing well
The perfect way to determine whether your rental property is performing well is by cash flow. Are you obtaining or losing money each month? Find this by taking your rental income and subtracting all your expenses associated with the property, including a mortgage payment. If you are losing money, then it is time to sell.
But first, always consider whether you can tweak the numbers so that you will have a positive cash flow. Do a complete analysis of what similar rental properties charge for rent in your area. If you find you can make more for your rental than what you are currently charging, consider increasing the rent as soon as you can and keep the property.
You are ready to Move On
Things change. Perhaps it is time for new beautiful scenery, or you have another better opportunity of calling your name. No matter your reasons for being a landlord, it is your right to do what is most suitable for yourself. If you have decided to make a change in your life, and being a landowner is not part of your plan, then selling your rental property is a reasonable solution.
Sometimes, something new and much better comes along, and you simply feel it is time to move on — nothing about bad tenants, bothersome maintenance, or anything of the sort.
Your Property is Now Worth More than When You Bought It
The main purpose of purchasing a rental property is to make money through it. Whether to rent it out for making a significant amount of cash flow every month or to sell it on a double rate, purchasing a rental property is always a great decision. If your rental property is now worth more than the price when you bought it, then you should take this vital sign as an advantage that it’s the right time to cash in. Selling the property might earn more than a long-term rental strategy. Also, you can put the capital back in purchasing another rental property and will still allow you to earn your monthly income.
The Bottom line
If you decide it is time to sell a rental property, you will surely feel better about your decision if you have a legit reason. Keep in mind that you can sell your rental property at any time, even with tenants in it. Just be certain you are doing so correctly.