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When To Sell Your Real Estate Properties

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Real estate properties are income spinners that provide cash flow for the investor. For a good investment, the rent should be used for capital recovery or paying off the mortgage in 10 – 13 years. Earning a passive income monthly or yearly without doing much work is a good way to become financially free. So there must be a very good reason when an investor decides to sell one or more of his houses.

The following will be a good reason to sell a house; the house is not performing very well compared to the capital invested, there is too much delay in cash flow, the interest rate is going too high, the house maintenance is becoming too high, the house is highly dilapidated that renovating it will not make much sense, there is always too much rental void, the need for a new house, move investment from a particular area or neighborhood, the government regulation is not conducive, there is high sales value appreciation, the property is not within easy reach and poorly managed.

Selling some of your houses may be the easiest option to raise cash if in a financial crisis. So for fast liquidity, the house will have to be sold below the fair market value. If this occurs within the first few years, there might be little or no gain for the investor depending on the house location and the economic situation of a country.

If the purpose is for long-term investment, I would recommend selling off the property after a few years when the total earnings less maintenance is equal to or greater than the total investment for the house. That should be possible after collecting rent for several years and using it to pay off the mortgage and initial deposit. That will create satisfaction for the investor knowing that the capital invested has been recovered. Therefore the entire sales will be considered as profit for the investor.

However, some investors see the rent as a dividend for their investment, which provides them with constant cash flow. This is when the house was bought or built out rightly with their capital.  This means the investor will have the cash to spend on various day-to-day activities without actually depleting the capital. For a good investment, the price of the house should keep up with inflation despite the wear and tear on it.

When the house is sold, the investor should not see this money as free for spending. The proceeds should be well utilized for another real estate investment or business that will continue to yield dividends or profits. Real estate is one of the investments where you make money work for you without doing much. A good investor should grow his portfolio over an extended period. That will result in more cash flow and ultimately leads to financial freedom. For real estate liquidity, it must be located in a choice area and have an appealing architectural design.

Sometimes investors sell their houses because the price and the demand are high. In this scenario, the house will be sold quickly and the proceeds invested in another bigger house or two houses in another neighborhood with more returns on investment. That may be considered a good business if executed successfully.

In conclusion, one question everyone faces when they decide to sell their real estate is: “Am I selling at the right time, and what should I do with the proceeds?”  It will not be in your best interest to stow away the proceeds in the bank as savings because of the depleting effects of inflation. Always look for a way to invest in a business/commodity that will bring you good returns and appreciation over time.

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