Four Questions You Need To Ask Yourself Before Selling Your Property | The STRR Podcast #51

Should you sell your property? Maybe, maybe not. There's some really important questions that you need to ask yourself if you're contemplating selling your property. I've got four of them for you today. Let's jump right in. Welcome to Short Term Rental Riches. Quick, actionable ideas to help you along your real estate investment journey, but with a specific focus on short term rentals. Welcome back to the Short Term Rental Riches podcast. Happy you're here again. As always, this week we're talking about whether or not you should sell your property. Or more clearly, four questions that you should always ask yourself before considering selling a property, and you should always have the answer to. And now sometimes we think we know why we want to do something, but it's not until we dig a little deeper that we uncover what's actually driving us. So I've got four questions for you today that you should ask yourself if you're considering selling a property. Four questions I ask myself anytime I'm considering selling a property. And this is for someone that's got equity in a property. So hopefully you're not underwater. Hopefully you got in at a good time and you bought your property. Right, to start off with. So a lot of people are talking about selling properties right now. I'm actually selling a couple, too. And so I've asked myself these same questions. And one of the reasons a lot of people are selling or contemplating selling is that prices are just so high, right? They've gone way, way up in a lot of markets. Now, remember, every market is different. When we talk about real estate, we're really talking about hundreds of different markets. So let's assume you have equity in a property and you're just contemplating selling this property. Well, the first question is, and this might seem just way too obvious, but why are you selling the property? I mean, really, why are you selling it? Is it because it's been too much work? Is it not making enough money? Do you think that there's maybe more opportunity somewhere else? Are you tired of the market? Are you hearing things in the news that make you think that maybe you've peaked in whatever area you have your property, you really want to just dig in? I mean, think about this honestly. Why are you selling? So that's the first thing. And it might be multiple reasons, but that's really important because that'll help us to determine what we're going to do with the proceeds. So once you've figured that out, the next question, question number two is, can you do better with those proceeds somewhere else? Not necessarily even in another property. But if you're selling a property and you're, and you're getting all this money that maybe you had tied up, what are you going to do with it? Do you have a better option already available or are you hoping to find one after selling the property? So determine why you want to sell your property. Maybe you're just fed up with it. Do you have a better place to put that money? If you sell it and you take all the money and you're hoping to put it into a better opportunity, but you don't actually have anything to put it into, well, then maybe you should reconsider selling it, right? And that brings me to question number three, that you should ask yourself if you're considering selling a property. And that is, can I keep this property, take out the money I'm hoping to gain after selling it, and use that for whatever I was planning on doing. So if you have a lot of equity tied up in the property, you can do a cash out refinance. That's a great way to have a better roe, a better return on equity, we call it. Now, your return on equity is simply how much equity you have in the property and the return that you're making on the total investment. So let's say you have $100,000 in potential equity and you're making $10,000 cash a year. That'd be pretty darn good. Very possible short term rentals, by the way. That's why, that's why we change a lot of our properties over to short term rentals. And the whole purpose of the podcast, of course. But let's say, you know, this is a normal rental and maybe you're making $1,000 in cash flow a year off $100,000 in equity you have. Well now that's only 1%, right? So that's, that's not very good. But if you can take that equity out, still keep the property, and still keep it with a loan that's profitable, then you can take that money and you can get a better return on it somewhere else and keep both your properties. Then you're building wealth way quicker. You have multiple people paying down your properties instead of just swapping one for the other. My goal in the real estate world is just to continue building my portfolio, to continue building wealth, to continue acquiring properties that ultimately our tenants or our guests, if they're short term rentals, are paying off for us. So that's the ultimate path to wealth with real estate. So really consider that if you have a property with equity already in it and interest rates are incredibly low right now. If you can take money out of that property, still have a cash flow and use that money for something else, then in my opinion that's a better option than just getting rid of the property. Question number four, to ask yourself if you're considering selling a property, and this is a huge one. Taxes. If you sell a property, you're gonna have tax consequences one way or another. We've talked about 1031 exchanges in the past, so we'll put a link in the show notes to which episode that.

Allow you to defer your taxes so you don't get stuck with a big bill. But if you're not planning on doing a 1031, maybe you just want that money to have a nice nest egg. Then you really want to talk with your tax professional and find out what kind of tax consequences you have from selling that property. Hopefully you've owned it more than a year and so you're not going to be taxed at your ordinary income levels. If you've owned it over a year, then it'll be capital gains tax. But really, really consider the tax consequences and you want to do this way in advance. Just let your tax professional know, hey, I think this property is worth this amount of money. Planning on selling it? Hopefully you have an idea of your income for that year and then you can calculate roughly how much tax you're going to owe. And number five, this is just a bonus. Are you selling your property just to cash out, retire? That's always a good day. That is a good day. I promise though, you'll probably get bored at some point and then you'll get back into real estate. It's a good, good industry to be in and it's a little addicting, I gotta say. It's addicting acquiring properties, but in a good way. I mean, a lot of times we're renovating properties, we're making them better for tenants, we're making them better for guests that come in, we're cleaning up neighborhoods. It's a nice feeling to have a portfolio of with lots of people living in your properties that enjoy your properties. And the same goes for our short term rentals. Nice to have a short term rental portfolio with lots of guests enjoying your rentals. So hopefully if you're going to sell a property, you're either exchanging it into another one or you at least have some better option for that money. The worst thing that we can do selling a property is selling it in hopes that we're going to be able to exchange it into something or invest it in another opportunity, but not be okay with that opportunity not working out and being stuck with the cash. So really evaluate that. Make sure you know exactly why you're selling. Evaluate your opportunities. Can you actually invest this money better somewhere else? And are you willing to put in the time time to find those other opportunities? Can you possibly keep your property, take the equity out and still achieve what other opportunity you're considering? And then lastly, consider those tax consequences. That's a big one if you're selling. Congrats. Hopefully you got a lot of equity. Hopefully you've done well. And until next time, have a wonderful day.

Well, you guys have been asking for it and I am sorry. So excited to announce that we have the dates picked out for our virtual event. Yep, November 14th and 15th. Coming up, we're going to cover everything we did in our two previous live events. But because of the times, we're going virtual and I couldn't be more excited, you're going to get all the same info, the systems, the processes, the tools and the secrets that I've learned managing now over 15,000 guests in multiple cities and earning millions and passive income. Head over to restmethods.com virtual to save your spot. Looking forward to seeing you in just a few short weeks.