Buying an income property is a great way to make money through real estate investing. Not only do homes have the potential to gain value over time, but when you own a rental, you get to generate steady income that opens the door to more opportunities.
But you may be reaching the point where you want to dump an income property in your portfolio. Maybe you’ve grown frustrated after years of dealing with tenant issues. Maybe you’re starting to see too much new apartment construction in the area, and you’re worried about the neighborhood becoming overly saturated with rental homes. Or it could be you’re just plain tired of owning actual properties and would rather grow wealth by buying REITs, or real estate investment trusts, which are a lot less hands-on.
Either way, if you’re thinking of selling an income property, now’s a pretty good time to do it. In fact, if you wait too long, you might end up losing out on the chance to profit big time.
Why it pays to sell now
The residential real estate market has lacked housing inventory since the latter part of 2020. But there are signs that inventory is slowly picking up.
In April, there were an estimated 1,030,000 housing units for sale, per the National Association of Realtors. But while that’s considered a very low supply, that number is also up 10.8% from March. And if housing inventory keep steadily ticking upward, it could be enough to bridge the current gap between available supply and buyer demand, thereby causing home prices to come down.
Then there are mortgage rates to consider. Borrowing rates have already risen sharply since the start of the year, and this week, the Federal Reserve is meeting to discuss its next interest rate hike — which could be a big one.
So far, rising mortgage rates haven’t done the trick of driving home prices downward. But if rates keep climbing at a rapid pace, many buyers could start to pull out of the housing market. That, too, could lead to a decline in home prices.
That’s why if you’re looking to unload an income property, you might really want to get moving. If you wait too long, you might lose out on money you might easily manage to command right now.
Furthermore, REIT shares are largely down across the board due to a broad stock market downturn. If your plan is to take the proceeds from the sale of your income property and use them to fill your portfolio with REITs, then it pays to do so at a time when you can scoop up REIT shares at a bargain.
We don’t know when the broad market will manage to stage its recovery. But it could happen at any time (just as the market could tank at any time). And so the sooner you get moving on listing your income property, the sooner you’ll put yourself in a position to benefit from current market conditions.
It’s OK to rethink your strategy
Your initial real estate investing strategy may have centered on owning an income property. If that’s no longer the case, don’t sweat it. But also, act quickly to benefit the most from current housing market conditions.
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