You goal as an investment property owner is to turn a nice profit when selling. You may not think that selling an investment home is different than selling a traditional home, but there are different tax regulations and marketing strategies to consider. Different scenarios can positively or negatively impact the return on your investment. Due to the importance of this sale, here are a few things to consider when selling your investment property.
💲 Do you want to sell your property?
Selling your property is just one way to make money from your investment. You may choose to use it as a rental property or vacation spot. Some investors prefer the promise of a monthly income. Others would rather leave the hassle of renters behind and take their return in one lump sum. Decide which is more important to you.
🏠 Is your investment property in good condition?
If you want to attract the best sale price, be sure that your property is in good condition. When it comes to incurring repair expenditure, you should inform the buyer so that you can agree on the best possible price. Consider fixing small things that could take away from your return. Your real estate agent can offer valuable insight in this area.
📊 What is a comparative analysis?
Your real estate agent will offer you a comparative analysis that can help you set an attractive asking price for your investment property. This analysis looks at recently sold homes and currently listed homes that are like yours. This report takes neighborhood, schools, upgrades, and other details into account when deciding your property’s value.
💵 Are there tax implications?
You should consider that the trading an investment property starts with a decrease in the basis for your home for the total depreciation amount you claimed on all preceding tax returns. Having rented the property for a long period or having a raise in value, means the profits could be lowered considerably by a reduction in the basis from the sale of the investment property. Remember that you are claiming capital improvements and depreciation from your investment property tax return. The best way is to work with a credible tax adviser to understand how taxes will impact the sale.
💰 How much money can I expect to receive from the sale?
There will be variance in the profits accrued depending on the market. If you buy a property that needs substantial work, make renovations, and sell it, you may make a 50 percent profit. This amount is the gross profit that excludes the expenditure on renovations. You could produce a good return within a short period of time.
Not all investments are flips. A rental property’s return will depend on how much prices have increased in that market. If there is a mortgage on the property, you can expect that to be a factor in the amount of your return on investment.
👥 Who is going to buy my investment property?
Like any traditional home sale, your listing may attract new or seasoned home buyers looking for a first or forever home. Of course, your property listing may attract other investors who are looking for deals. If the property is currently being rented, you may want to consider offering the purchase option to the renter before listing on the open market.
💡 Should I consider a roll over?
Check with your real estate agent to see if the Internal Revenue Code 1031 works for your situation. This code gives real estate investors a chance to avoid taxation on the gains by re-investing in a similar property. The time limit is 45 days of determining the new property and six months to finish the transaction. However, if you are selling to get some capital on another investment property, you will have to deal with the taxation involved.
Your real estate agent is the best source of information about the local community and real estate topics. Give the 10X Home Team a call today at 602-352-3600 to learn more about local areas, discuss selling a house, or tour available homes for sale. Ask an Expert here!
