Having a rental property anywhere in Los Angeles is a big achievement. You can always make passive income if you have a good property manager taking care of your Los Angeles rental property. However, as good as this may sound in a paper, there comes a time when you have to give up and sell your property.
As one of the most experienced property management companies in Los Angeles, we have in some cases advised our clients to sell their investment property or completely overhaul it. If your property has no chance of generating profit again, you should consider selling. Another buyer can convert the property or put it into a different use. This way, you won’t be at a total loss.
However, before you start thinking about selling, you need to make a number of considerations. If you have an investment property in Los Angeles, you don’t need to sell if:
Your Property is Bringing in Rental Income
Don’t sell a property that is generating income every month through rent. If you notice that the revenue is going down or you don’t have the time to manage the property anymore, you can hire the services of an experienced Los Angeles property manager to help you with the property.
Your Property Is In High-Demand Rental Area
Avoid selling a rental property in a high-demand rental area. These areas are pure gold and it is not easy to have a property in such area to your name. Locations close to a beach, public transportation, shopping center, and universities generally do well in Los Angeles. You can consider hiring a different property manager to help you manage the property and get the best value from it.
When You Should Sell
There are points when you have no choice than to sell your Los Angeles rental property. Some of these conditions include:
Months of Consistent Negative Cash Flow
When you have lost a good amount of money trying to keep up a rental property, you may consider selling. If after changing rental property manager and you continue getting negative cash flow, it is the first sign that it is time you sold the property.
- You Can No Longer Pay For Maintenance/Renovation
In some cases, you find that your property has damaged beyond the point you can afford to renovate. In this case, getting a loan to effect renovation may not always be the best choice. You may end up getting a loan for renovation and you continue receiving negative cash flow, when this happens, you will now have two problems which include: repaying your loan and trying to hold onto your property.
If you can no longer afford the cost to renovate an old or damaged property, you should consider selling to a more capable buyer.
When You Are a Remote Landlord
When you live far away from your property, you should consider either selling or making use of a property manager. If your rental property is still making good money for you, get a property manager. However, if you don’t want to go this route, consider selling the property and use the money to buy another property close to your current location.
- When the Cap Rate Changes
You need to keep the cap rate between 5% and 10% at all time. If you are wondering what cap rate is all about, it is the income-expenses/value. You can determine the cap rate when choosing an investment property. Some changes may cause the cap rate to increase, it may be that your property taxes have increased or rental market is going down in your area. Another reason could also be that maintenance cost is going way up and you can no longer afford the monthly expenses. You may consider selling when you found yourself in this problem. Generally, it is recommended you consider selling if the percentage is less than 5%.
Selling your rental property is not always the best choice. Before you sell, find out if top Los Angeles property management companies can help you turn your rental property around and bring in profit. You should only consider selling when it has become impossible to make a profit.