Long Island real estate investments can be a lucrative way to build your wealth and secure your financial future. However, there are times when an investment property may no longer be the right choice for you. In this blog post, we’ll discuss the five signs that it’s time to throw in the towel on your Long Island real estate investment.
Not only are the inflation changes affecting the equity and value of properties, but rising interest rates make it harder to have cash flow.
1. Negative Cash Flow
Negative cash flow is a clear indication that your investment property is not performing as well as it should. It means that the expenses associated with the property, such as mortgage payments, taxes, insurance, repairs and maintenance costs, are greater than the income it generates. Negative cash flow can be a sign that it’s time to sell the property and move on to other investments that will provide a better return on investment.
The more you have to keep putting in your own money to support an investment, it has become a liability. Only good debt is worth it, debt that is able to get you paid in return. If you have a big mortgage on a property that your tenant’s rent isn’t covering along with all the additional expenses, it is time to cash out and move on to a better investment that will actually pay you.
2. High Vacancy Rates
Vacancy rates are another crucial factor to consider when assessing the performance of your investment property. If you have a high vacancy rate, it means that your property is not attracting tenants, and you are losing out on rental income. A high vacancy rate can be a sign that you need to re-evaluate your rental strategy or make improvements to the property to make it more appealing to potential tenants. However, if you have tried everything and the vacancy rate remains high, it may be time to sell the property and move on.
What is even worse about vacant properties is that they deteriorate quicker. Pipes can burst or freeze and flood the interior of the house. Squatters can move it and take control of the property. The township and municipalities can slap violations and condemnation notices on the house and make it nearly impossible to bring it back to code for legal use and occupancy.
3. Declining Property Values
Real estate values are subject to market fluctuations, and it’s not uncommon for property values to rise and fall over time. However, if you notice that property values in your area have been declining consistently, it could be a sign that it’s time to sell. A declining market can make it difficult to sell your investment property for a profit, and you may end up losing money in the long run if you hold onto the property for longer than you should. In some cases, you may be better off selling right away, as opposed to waiting around for things to get worse.
It is always better to cash out and quit while you are ahead, rather than waiting to long after the train has already left the station and then the next one never comes.
4. Major Repairs Needed
Owning an investment property comes with a host of maintenance and repair costs. While minor repairs are a part of the regular upkeep of any property, major repairs can be a significant financial burden. If your property requires major repairs that are beyond your budget, it may be time to sell the property before the situation gets worse. Delaying necessary repairs can lead to more significant problems down the line, and it may end up costing you more when all is said and done.
Even if you have cash flow on a property but the expenses of repairs end up killing any monthly profit, it means the property needs a complete over haul and it may be better to sell it to a cash buyer who can take it over quickly and as is before you have to dump even more money into fixing it for an end-user buyer to take on the open market on MLS.
5. Personal Circumstances
Finally, personal circumstances can also play a role in your decision to sell your investment property in Long Island. Life changes such as a job relocation, divorce, or the need for immediate cash can make it necessary to sell your property quickly. In such cases, it’s essential to weigh the pros and cons of holding onto the property versus selling it quickly to meet your financial obligations.
On Long Island, it is becoming even more expensive to afford to live here, and it is nearly impossible for just one person to maintain all household expenses, especially after divorce or death of a spouse. Many times, people in these situations end up in foreclosure and fall too far behind to ever catch up. They usually do not make enough money on their own to carry all the household expenses that go along with paying a mortgage monthly, and the bank will never qualify them to obtain a loan modification, no matter how many times they applied or have been temporarily approved for one.
Owning an investment property can be a rewarding experience, but it’s essential to know when it’s time to move on. If you notice any of the five signs mentioned above, it may be time to sell your Long Island real estate investment and invest your money elsewhere. Remember, the ultimate goal of any investment is to generate a return on investment, and if your property is not doing that, it’s time to consider other options. If you are looking for a way to quickly sell your bad investment property in Long Island, reach out to our team to find out how we can help you! (631) 759-4408