When it comes to property investment, there are a lot of things to think about. You need to consider the location, the price, and how you’re going to make money out of it. But one thing that a lot of people don’t think about is how they’re going to get out of the investment. What happens if things go wrong? What if you want to sell?
When to cut your losses with your investment
Typically, a combination of the below reasons results in less desirable property investment and one that you may want to exit.
Poor Location
Many people think that the only important factor to consider when buying a property is the price. However, location is also a crucial factor that needs to be considered, especially when it comes to buy-to-let property.
If the property is in the wrong location, it will be much harder to find tenants, and it may even be difficult to sell the property in the future. For example, a property in a crime-ridden street is likely to be much less popular than a property in a safe, affluent area.
In addition, properties situated in areas with poor transport links are likely to be less desirable than those situated near good schools and amenities.
You cannot afford the mortgage payments
Many people dream of owning their own home, but the reality is that homeownership can be a financial burden. For one thing, mortgage payments can be extremely high, especially in expensive markets. In addition, there are often additional costs associated with ownership, such as property taxes and maintenance fees. As a result, many investors fail to properly budget for the ongoing expenses and need to sell.
You are exhausted from dealing with tenants
investing in rental property can be a great way to generate income and build long-term wealth. However, it can also be a lot of work. From finding tenants and dealing with repairs to managing late rent payments and enforcing lease terms, being a landlord involves a significant amount of time and effort.
If you’re feeling burned out by the day-to-day hassle of being a landlord, and you are not able to leverage a management company, you may want to exit your property investment.
Exit strategies
There are a few different exit strategies that you can use in property investment. You can sell your property, refinance it, or rent it out. Each one has its own set of pros and cons, so you need to choose the one that will work best for you.
Selling your property
Selling your property is the most obvious exit strategy. You will need to determine the best way to price and market your home, as well as how to handle any problems that come up during the selling process. By having a clear exit strategy to sell your property in place, you can maximize your chances of getting the best possible price for your home.
One common method is to list your home with a real estate agent. This can be a good option if you’re not in a hurry to sell and if you’re confident that your agent will be able to find a buyer who’s willing to pay your asking price. However, it’s important to keep in mind that real estate agents typically charge a commission, which can eat into your profits.
You may also want to consider selling it yourself. This can be a good option if you’re willing to put in the work to market your property and show it to potential buyers. However, it’s important to be realistic about your chances of finding a buyer who’s willing to pay your asking price.
No matter what selling strategy you choose, it’s important to have realistic expectations about the selling process. It can take time to find the right buyer, and there’s always the possibility that you won’t get your asking price. But by having a clear exit strategy in place, you can increase your chances of making a successful sale.
Refinancing your property
Another common exit strategy is refinancing your property. This involves taking out a new loan with more favourable terms to pay off the existing loan. This can be a good way to free up some cash if you need it or to lower your monthly payments. However, it’s important to remember that you will still need to sell the property to make a profit. If you’re not sure you can do that, refinancing may not be the best option for you.
The most common method here is to take out a home equity loan. This type of loan allows you to use the equity in your home as collateral, which can give you a lower interest rate and payment terms. Another option is to get a conventional mortgage with a fixed interest rate. This type of refinancing can be a good option if you have good credit and can afford the monthly payments. However, it is important to remember that if interest rates rise, your monthly payments could become unaffordable.
Renting out your property
A well-crafted exit strategy is essential for any landlord looking to rent out their property. There are several different exit strategies available to landlords, but one of the most popular is to simply rent out the property until you are ready to sell it.
This approach has several advantages, including the ability to generate income from the property in the meantime and the flexibility to adjust your plans as market conditions change.
Selling an investment property with a sitting tenant
Selling an investment property with a sitting tenant can be a complex process. There are a few key things to keep in mind to ensure a smooth transaction.
First, it is important to check with the tenant to see if they have any current lease agreements in place. If so, you will need to factor this into the sale price and negotiate with the tenant regarding their continued occupancy.
Second, you will need to disclose any relevant information about the property to potential buyers, including any necessary repairs or renovations that may be required.
Finally, it is important to consult with a real estate attorney to ensure that all legal requirements are met and that both the buyer and seller are protected throughout the process. With careful planning and preparation, selling an investment property with a sitting tenant can be a straightforward and successful transaction.
Evicting a sitting tenant
You may be in a position where the sale will only proceed with no tenant in situ. The process of evicting a sitting tenant from your property can be time-consuming and expensive. If you have a tenant who is not paying rent or is causing damage to your property, you may be tempted to simply change the locks and force them to leave.
However, this is not legal, and it could end up costing you more in the long run. The first step in evicting a tenant is to give them formal notice that they are being evicted. This notice must be in writing and must be served by a law enforcement officer or a process server. Once the notice has been served, the tenant will have a set amount of time to vacate the premises. If they do not leave within that time frame, you can file an eviction lawsuit with your local court. An eviction can be a lengthy and complicated process, so it is important to consult with an experienced lawyer before taking any action.
Conclusion
No one ever said that being a property investor would be easy and exiting your investment property is no exception. There are several different strategies available to landlords, each with its advantages and disadvantages. It is important to carefully plan your exit strategy before taking any action, so you can ensure a smooth and successful transaction.
