Renting Vs. Selling Your Investment Property
Renting Vs. Selling Your Investment Property
Buying investment properties in New York City is quite popular. But, there comes a time when many investors have to decide between selling the property and renting it out. It is not an easy choice, and the answer depends on your unique situation.
If you are trying to decide between buying and renting, here are four things to consider.
- Positive cash flow is essential.
If you are already renting an investment property, this will be easy to determine. What is the current cash flow? Are you making money or scraping by to keep the property up to code? If you find yourself having difficulties month after month, it may make sense to sell the property. If you recently purchased an investment property and made updates, it will be difficult to project the cash flow. You’ll want to estimate how much revenue it will generate based on the number of years you are willing to be landlord and compare it to how much selling it will yield.
- Are you local to the property?
The closer you live to a rental property, the easier it is to manage. If you initially bought an investment property nearby, but now live in another city or state, it can be challenging to provide the service your tenants expect of you. Selling an investment property makes sense if where you live makes it hard to manage tenant expectations.
- Look at the cap rate.
A cap rate calculates the income and expenses to the value of a property. It is a calculation many investors use to determine if they should buy an investment property and makes sense to recalculate if you are unsure about selling. To calculate the cap rate, subtract annual expenses from the income and divide this subtotal by the property value. The recommended cap rate is 5% or more. If your cap rate is less than 5%, it is time to list your property for sale.
- It’s a trending location.
If your investment property is in a trending location- one that is popular and attracting plenty of new tenants – it may be better to rent the property out. Trending neighborhoods often attract better tenants that are willing to pay a premium for the location. Properties with easy access to public transportation, nightlife, or close to universities have more demand than other areas. In some cases, you may experience yearly tenant turnover as college students graduate, but the demand is consistent.
Deciding whether to sell or rent an investment property is no easy task. Several factors play into which is the best choice for you. Use these recommendations as a guide for making your decision. If you are ready to sell your investment property or need a real estate broker to help find the right tenants, the Hillel Realty Group can help! Contact our office today at 718-417-7000.