Blog Post

When should I decide it is time to sell my rental?

Dustin Edwards • Jul 03, 2020

At Some Point the Decision to List for Sale or Continue for Rent Should be Asked

For Sale or For Rent - You Decide
Owning a rental property is usually filled with a bit of trepidation. After all, what happens the first time the property is vacant? Of course for many that decision doesn’t even alarm them, but there always comes a time when people ask...should I sell my rental?

While we aren’t CPAs, you can look up the tax code and find out that you can sell a primary residence with a gain of up to $250,000 as an individual tax free or up to $500,000 if you are married. tax free. This rule applies if you have made the property your primary residence for at least 2 of the last 5 years. In Southern California where the gains can be in the 5-10% range annually over a 5 year where the median home value in Los Angeles County was valued at $650,000 in 2020, then taking a tax free gain can be pretty tempting. If it were only that easy then many people might sell each time within the 5 year window, so why do so many decide to keep their rentals? We invite you to consider a deeper thought process to help you decide what is right for your goals.

Selling Outright
When we work with property owners, sometimes it is their first rental and that is great. At times that means they use that first rental as the foundation of a real estate portfolio and at other times they decide that owning a rental just isn’t for them. Regardless of their decision we are here to help them in their mission

If selling is the right decision, we do have a division that is designed to help our rental owners sell their investment properties. Especially those owners who meet the requirement of having occupied the property 2 of the last 5 years as their primary residence we understand the objective of taking those tax free gains vs. taking the long term gains that are offset by depreciation.

For those owners taking the gains on their investment property the main question we ask is “what is your goal with the gains from this property?” While certainly people don’t have to answer, our main purpose in asking the question is ensuring there is a plan in place after the sale. With any of our clients we want to make sure we help them achieve their goals, even if that means we don’t benefit long-term.

1031 Exchange
For many long term property owners this has proven to be a great strategy. A 1031 exchange allows you to defer the taxable gain. In other words you could have a gain, north of $500,000 (if you were married) and delay the taxable gain. For many property owners, especially those in Southern California, it can allow you from being a single family rental owner to a 2-4 unit property owner.  

For example, just envision that you are the owner of a $700,000 single family home owner in Long Beach and you have a dent position of $150,000. Your gain, even with fees, would likely be north of $500,000. Provided that you are looking to put a minimum down on your next income property that would allow you to invest in a property north of $1,500,000 giving you access to a wide array of real estate options (2-4 units or even larger) throughout Long Beach.
End of Depreciation Period

The decision to sell might also come due to the end of the depreciation cycle of your residential income property. The tax code (please check with your CPA) allows a depreciation expense for 27.5 years. If you have owned a residential income property, especially in Southern California, for 27.5 years it is likely that you have a large gain available and it could just be time to sell. Of course if you are in that position we would recommend meeting with a CPA and even including us to explore your options in up leg properties to see if a 1031 exchange might be best.

Whether you want to take a tax free gain, are considering a 1031 exchange or you are at a crossroads due to the end of depreciation we understand the decision isn’t an easy one. When you want to find out more about your options invite you to call us today (562) 888-0247 and we can share our experience. When you are confident you want to continue to rent out your property we invite you to fill out our Free Rental Analysis where we perform a comprehensive comparison to share your rental stacks up to the competition.

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By Dustin Edwards 01 May, 2024
Everyone wants to feel safe in their homes. As an investment property owner, it's up to you to decide whether or not to include security measures in your property. Many of the costs associated with the security measures can be included in the rent, meaning not only can you keep your property safe, but you can earn more income in the long run. However, you would still want your tenants to have renters insurance to protect their assets. Today, we’ll discuss the top five security measures you can add to your property and why they're beneficial to you and your tenant. Security Cameras Cameras are probably one of the first security measures people think about when asked about security. Cameras provide more benefits than just surveillance. They provide an extra level of security for the safety of the tenants and their belongings. Additionally, security cameras can be useful when repairs are required. Cameras can aid in supervising repairs and maintenance to ensure you’re receiving the agreed-upon work. During vacancies when the property is empty, security cameras can help keep the property safe from potential intruders. Doorbell cameras are incredibly popular now. They provide the aforementioned safety of a camera that can be accessed remotely, as well as the ability to communicate with visitors. Although one must be careful never to say you're not home, just say you're unavailable to strangers. Security Lights Security lights with motion detectors are another effective tool when adding security measures to your property. These lights brightly if a potential intruder attempts to get near your home. They can provide enough illumination to see the intruder or, at the very least, scare them off. Nowadays, you can find a combination of security cameras and motion-activated security lights, such as the floodlight cam wired plus from Ring . Additionally, because these lights only turn on when motion is detected, they’re more cost-effective than traditional lights with a switch. Illuminate the Property Light generally deters intruders as it's more difficult to hide. Adding lighting to the landscaping can increase the security of the property while creating a relaxing atmosphere. Lights can also be used in other areas of the property to accent features such as trees, benches, or artwork. This can help your property stand out while giving your tenants an additional feeling of safety. Keyless Entry Keyless entry is seen as both a convenience feature and a security feature. They usually use an electronic passcode, biometric data, or grant access through a smartphone app. Physical keys can be lost, stolen, or duplicated. You reduce the risk of unauthorized entry by eliminating the need for a physical key to enter the property. Many keyless entry systems include several features, such as remote locking and monitoring. Although keyless entry is a great new technology for keeping your tenants and properties safe, they’re best used with other security systems. Security Company Nothing beats having an extra pair of eyes on your property for security. This is where security companies like ADT and SimpliSafe come in. While companies may deal with security in varying ways, they aim to protect your investment. While safety is the primary role of a security company, remember that many tenants may be willing to pay more for a premium amenity like a home security company. Keeping your property and tenants safe is incredibly important to the longevity of an investment property. If you’re looking to improve the security of your Long Beach rental property or need help managing your beach city rental property, we invite you to call us today at (562) 888-0247 or fill out our Owner Application online .
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