Investment Property Disposition Strategy
You’re hanging on hoping the market will improve throwing good money after bad. Even more difficult, your investment is performing well, there are no headaches and the rent checks keep coming in like clockwork. You ask yourself, “Should I sell?
Just like a new business has a plan, you should have had a plan for your investment property when it was acquired. I am hoping when you purchased your investment property you created a plan – a strategy stating your goals, your proposed improvements, the desired tenant population and your holding period. Part of your plan is to know your investment property disposition strategy and the triggers.
Some larger institutions will actually have a five or ten year plan and will sell regardless at the end of the holding period. Other investors may acquire a property with intentions of their heirs taking it over. In either case you need to create your short and long-term strategy.
Speaking of triggers, here are a few that may be a part of your strategy. Several are more subjective in nature and probably not the best indicators as they are not planned and result in emotional decisions. It is better to have an objective trigger that can be quantified:
- You’re tired. The day-to-day operations, dealing with tenants, city & county, lenders, insurance, brokers and the property manager are causing your eye to twinge.
- You and your partners no longer have the same goals or continually do not see things eye-to-eye.
- You had life events that changed your focus. It may be illness, retirement, divorce, being an empty-nester or relocating.
- You reached your goal for the investment and it is time to execute the disposition strategy.
- You revised the focus of your portfolio for the current stage of your life and the investment no longer fits.
- Supply will increase in the area with anticipated construction thereby adding space to the market potentially taking away your tenants.
- You inherited the property with your siblings and know you cannot be in business together.
- You found another investment with greater potential.
- Your investment is no longer performing according to your strategy.
- You sense the real estate bubble is about to burst and now is the time to sell at the top of the market.
- You received an unsolicited offer you cannot refuse.
- You recognize factors in the future of our economy may change such as employment, taxes and interest rates all which may affect your cash flow.
- Major repairs are coming and you would rather sell now and let someone else deal with it.
- The building is old and tired and needs a facade improvement or a major rehab and you do not have the cash or the energy to pursue.
- You need the cash.
- The neighborhood or local government is changing and you do not like what you see.