When you’ve been investing real estate for a long time you may reach a point when you are ready to sell. Perhaps you’ve had enough of the headaches of being a landlord, maybe you want to pursue other opportunities, or are ready for a lifestyle change. This is not to be confused with desperation to sell for financial reasons.
If your back is against the wall financially you may be forced to accept terms that are anything but attractive. But if you are looking to sell because you want to but don’t really have to, then you are in the driver’s seat. If time and money are not a factor in your desire to liquidate your real estate holdings then the process is much the same as it should have been when you entered the business. Savvy investors have a game plan when they jump in the real estate waters, those that don’t plan usually fail. You need to have a plan for liquidating as well.
The first step is to accurately assess where you are. As a real estate investor you should certainly know the value of your holdings, cash flow, status of leases, condition of your properties, amount owed on mortgages, and any deferred maintenance or other issues that may be lurking. There is one aspect of your portfolio you may not pay much attention to – potential tax liability.
One of the benefits of owning rental properties is the ability take a tax deduction for depreciation even though you don’t experience any real out-of-pocket loss. Unfortunately that depreciation is recaptured when you sell. This means that you could have a tax liability even if you don’t have a significant profit. The problem may be exacerbated if you have refinanced and taken cash out of your properties along the way as many investors have. There are strategies that can be employed if you are in this situation. That’s why you should consult your tax advisor before making any move to liquidate.
The market in your area may dictate your next move, especially if sales are slow. If you aren’t concerned about how long it takes your best action may be quiet networking. Let the people in your sphere of influence know that you may be interested in selling some of your properties. Often the best deals you make when acquiring investments happen by word of mouth, why would selling be any different?
If you have tenant occupied properties you may wish to look at your tenants as potential buyers. Of course, that means reliable and qualified tenants, not problem renters. If you own the property free and clear or have substantial equity you may want to hold a note for the seller. These notes can always be resold if you wish. Other investors may be interested in acquiring your properties, though you shouldn’t expect the same price you could receive from a retail buyer.
The point here is to explore all possibilities rather than just blindly list your properties. Liquidating in a slow and methodical manner will allow you to avoid being perceived as a desperate seller. Be sure to plan wisely, consult your tax pro, attorney, and any other advisers you are working with. You entered the business with an eye on making the best deals and greatest profits possible. Shouldn’t you leave the same way?
Retirement at sixty-five is ridiculous. When I was sixty-five I still had pimples. – George Burns
Photo Credit: Jim Capaldi