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5 Reasons to Consider Selling Your Investment Property

Market fluctuations and continued uncertainty created by the COVID-19 pandemic have left many investors wondering whether now is the right time to sell their investment property. Supply and demand certainly point to it being a seller’s market, but that’s not the only consideration. If you’re on the fence about selling your investment property, you’ll want to carefully consider your motivations before deciding. Here’s a look at five of the most compelling reasons to let your investment property go.

1. You’re Dealing with a Major Life Change 

Sometimes, selling an investment property has nothing to do with the property itself and everything to do with your personal circumstances. A major life change – like gaining or losing a family member, a lay-off, or a major accident or illness, or relocating for a job – may force you to re-evaluate your investment strategy. 

If you’ve found that you’re suddenly strapped for cash or don’t have the time to deal with your property any longer, then selling might be the right move for you. On the other hand, if your circumstances have left you unable to work or earn as much as you had previously, the passive income from an investment property could help get your finances back on track. In this case, holding on to the property may be a smarter move. 

2. You Want to Invest in a Different Market

There are many reasons to reallocate your property investments to another market. Perhaps you’ve found an opportunity in an up-and-coming neighborhood, or you feel like the area you’re currently in has neared its peak. 

Many of our clients are currently selling their California rental properties due to concerns over growing rent control and tenants’ rights trends in the state and are relocating their investment equity into more landlord friendly states.

When opportunities arise, timing is critical. You’ll want to make sure you put your property up for sale fast enough, so you don’t miss the ideal window for your new investment. 

3. You’re Not Seeing Enough Return on Your Investment

If your rental property is underperforming, it may be time to consider getting out. Take a hard look at your annual after-tax net cash flow divided by the amount of current equity in your property e.g., likely sales price less any loan and sales expenses. If your annual net returns are under 3%, trading-up your property may give you new opportunities to earn a better rate of return. 

Many of our clients have owned properties long enough to have used up their allowed depreciation which has caused their after-tax income to decline due to the loss of the healthy deprecation tax deduction afforded to real estate investors. 

If you’re consistently earning less than you should, it’s time to take a closer look at the pros and cons of selling. 

4. You Need to Diversify

Do you have a high percentage of investment funds tied up in too few properties?  If so, you’ll want to think about diversifying to minimize risks associated with having too many eggs in a single basket. 

Geographic diversification may also be a desirable objective. If your primary residence, rental property, and job are all in the same location, you may want to consider reallocating your investment dollars into areas that may be more attractive and complimentary to your current portfolio. 

5. You Inherited an Investment Property

Perhaps you never intended to be a real estate investor in the first place. If you’ve inherited an investment property that you have no interest in managing, you’ll need to make some decisions. In this case, you’ll typically either want to hire a property manager or sell the property and use the proceeds for another type of investment. 

Other Important Considerations

If you’ve decided it’s the right time for you to sell your investment property, it pays to look at your tax obligations. Many owners of rental properties are surprised to learn that their tax obligations upon sale could eat up as much as 40% of their gain. Engaging in a 1031 exchange can help you save a significant amount in taxes, which will allow you to keep more of your investment money working for you. 

We would be pleased to assist rental property owners to analyze the performance of their current properties and explore options that may be more suitable to their overall investment objectives. 

To learn more and explore whether this is the right solution for you, give us a call! We’re happy to schedule a no-obligation consultation.  

You can reach us at 866 398-1031 or

Please feel free to download our FREE ebook to learn more about real estate tax deferral strategies!

Help Save 1031 Exchanges
Write to your Member of Congress and Senators urging them to oppose restricting Section 1031 like-kind exchanges. As part of the American Families Plan, the Biden Administration has proposed eliminating the application of Section 1031 for gains greater than $500,000. Like-kind exchanges have been part of the U.S. tax code since 1921 and are one of the tax code’s most powerful economic tools. It is critical that we all vigorously and visibly oppose this proposal. Make your voice heard with a pre-filled letter, which you can customize to add personal anecdotes or powerful client stories to highlight the positive impact of Section 1031 like-kind exchanges. Take action today by clicking HERE.

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*The Tax Cuts and Jobs Act of 2017 allows real estate investors to fully write-off the cost of select new and used equipment, furniture, fixtures, and most land improvements in the year when the investment was made rather than requiring that the improvements be depreciated over time. This can be a powerful tool for lowering taxable income. Please consult your tax advisor to learn how you may benefit.

Paul Getty

Paul Getty is a licensed real estate broker in the state of California and Texas and has been directly involved in commercial transactions totaling over $3 billion on assets throughout the United States. His experience spans all major asset classes including retail, office, multifamily, and student, and senior housing. Paul’s transaction experience includes buy and sell side representation, sourcing and structuring of debt and equity, workouts, and asset and property management. He has worked closely with nationally prominent real estate brokerage and investment organizations including Marcus Millichap, CB Richard Ellis, JP Morgan, and Morgan Stanley among others on the firm’s numerous transactions. Paul also maintains a broad network of active buyers and sellers of commercial real estate including lenders, institutions, family office managers, and high net worth individuals. Prior to founding First Guardian Group/FGG1031, Paul was a founder and CEO of Venture Navigation, a boutique investment banking firm specializing in structuring equity investments made by institutions and high net worth individuals. He possesses over 35 years of comprehensive worldwide business management experience in environments ranging from early phase start-ups to multi-billion-dollar corporations. His track record includes participation in IPOs and successful M&A activity that has resulted in investor returns of over $700M. Paul holds an MBA in Finance from the University of Michigan, graduating with honors, and a Bachelor’s Degree in Chemistry from Wayne State University. Paul Getty holds Series 22, 62, and 63 securities licenses and is a registered financial representative with LightPath Capital Inc, member FINRA /SIPC. Paul is a noted speaker, author, and actively lectures on investments, sales, and management related topics. He is author of The 12 Magic Slides, Regulation A+: How the JOBS Act Creates Opportunities for Entrepreneurs and Investors, and Tax Deferral Strategies Utilizing the Delaware Statutory Trust (DST), available on Amazon and other retail outlets.

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