Selling Your Property
The common wisdom in real estate is never to sell. However, there are several good reasons to sell your property in a bull market like today’s. You just need to have a plan for your hundreds of thousands of dollars after the sale. Every situation is different, and you may have personal reasons why you need the money, but here are some good economic reasons to sell:
1) Neighborhood Hills and Valleys
Just like the economy, different neighborhoods in Los Angeles can peak in price. Neighborhoods become hot at different times, and if your property’s neighborhood is peaking in interest, it may be a good time to sell. After all, you were smart enough to invest in this neighborhood before it was hot. Why don’t you take advantage of the next up-and-coming neighborhood before it pops. Selling your West Hollywood, Los Feliz or Silver Lake property at top dollar and buying low in Cypress Park or Boyle Heights will increase your equity faster, and more dramatically.
In other words, if the prices in West LA, Santa Monica, or Echo Park are ridiculous (they are), then you should sell to these ridiculous buyers, and then use that equity in a smarter investment.
2) Smart Equity
Neighborhood isn’t the only way in which you can improve the quality of your equity. Maybe you’ve built enough equity in your property that you’re cash-flowing okay, but there’s no cost-effective way to really improve your property. You feel like it’s hit a dead end, maybe due to rent control, tenant issues, floorplan, neighbors, or you’re not even sure why. There are buyers out there who will buy your property at a high price (developers, homeowners, foreigners), and you can move that equity into a property that fits your business model better.
3) Low Rents = No Cash Flow
Rent control is a problem for lots of property owners. And while there are ways to improve your property under rent control, that takes lots of initial cash that you don’t have. Selling your property with low rents to a buyer with more funds is a great option for getting yourself in a better position to cash flow. Almost all of my clients buy properties where there is upside potential, and we select the right property for each client based on their ability to improve it.
4) Trading Up
The most aggressive real estate business people will continue to build equity rapidly by buying and flipping, buying and flipping. To do this using a 1031 exchange, you have to wait 1 year between flips. But I have had clients successfully sell one property and buy two, increasing the total value of their portfolio.
While selling your property is a big decision, it doesn’t hurt to test the market once in a while and list your property on the MLS to see where it stands.