Multi-family properties are great investments that have multiple tenants ensuring you are able to build equity in the property quickly and efficiently. But as with every niche in real estate, there are times to buy, times to hold and times to sell a property. Here are signs it is time to sell your multi-family property in Hattiesburg. Pay attention to them to avoid holding on too long and losing money in the process.
Rental Market Changes
When you initially acquired the property, you were greeted with a promising lineup of tenants eager to sign long-term leases, drawn in by the allure of a neighborhood known for its highly-rated schools and vibrant community amenities. However, the landscape has shifted dramatically since then. You find yourself facing a disheartening trend of rapid tenant turnover, with many unable to meet the rising rent demands. As a result, more units are becoming vacant, and you’re witnessing a noticeable decline in the quality of local schools and community facilities.
Given this shift in the market dynamics, it may be prudent to consider selling your multi-family property, particularly if you are not residing in one of the units. The combination of falling rental prices coupled with stagnant interest rates poses a unique challenge. If you’re unable to refinance for more favorable mortgage terms, your once-promising investment could quickly turn into a financial drain, with outflow surpassing inflow.
Moreover, in some cases, rental prices are reaching a point where they mirror mortgage payments, making it increasingly burdensome to continue renting without accruing equity. These troubling market indicators may strongly suggest that it’s time to evaluate your options and potentially facilitate the sale of the property before conditions worsen further.
Tenant Issues
The rental market is undergoing changes that may lead to various challenges with your tenants. One pressing issue could be an uptick in crime within your neighborhood. This unsettling trend might raise suspicions that illicit activities are not only rampant in the vicinity but could also be taking place within your own property. If you find yourself concerned that these troubling occurrences are becoming a common theme, it may be worth contemplating the sale of your property.
Allowing tenants to sublease or house unauthorized individuals could expose you to serious repercussions, including significant financial losses and potential damage to your property. The implications extend beyond mere inconvenience; there is a genuine risk that your rental could become a site for illegal activities, such as drug trafficking or prostitution. Such unlawful use of your property not only jeopardizes its integrity but also heightens the danger of government seizure, a scenario you undoubtedly want to avert at all costs.
Management Issues
Keeping an investment property is a time commitment. You must manage the property by taking the time to collect rents, advertise for new tenants, fix and maintain the property. If you have been doing this and no longer have the time, you might consider hiring a firm to do it. If the numbers don’t make sense to pay someone, it might be time to sell.
This happens often when an investor buys a property in one area that is convenient to his home but then moves out of the area. If the revenues of the property don’t warrant a property manager, investors often decide to flip the property into a new one closer to home or cash out.
Tax Scenarios
Buying commercial property has tax consequences. While you own the property, you get the benefit of deductions and depreciation. If you don’t hold the property for at least two years before selling, you could be paying short-term capital gains. If you hold it longer, you may still pay gains but at the lower, long-term capital gain rate. If the real estate market has declined, at least in the area of the multi-family home, it might be a good time to take a loss and offset other gains you may have in your real estate portfolio.
If you are unsure about the timing of selling your multi-family property, speak with one of our professional real estate agents. We can help you run the numbers to see if selling or holding is your best bet at this time.