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5 Most Common Reasons For Landlords To Exit The Real Estate Business
Landlords exit the real estate business all the time. And it might surprise you to learn that a lot of the time, it’s not due to a loss-making operation.
There are a lot of pragmatic reasons for these decisions to be made. So don’t judge.
One day you might want to leave it too. This could be due to an exit strategy that you are committed to… or otherwise.
Here are 5 of the most common reasons to call it quits.
1) Realization of profits
Certain landlord profiles would match those of stock investors. They have an entry strategy and an exit strategy that they are disciplined enough to enforce.
Once a target of maybe 20% capital gains have been achieved, it would be time to cash in.
Depending on your views on investing, you might eventually feel that you don’t feel wealthy even when the properties you hold make you a millionaire on paper.
It’s time to reap the rewards of your success in real estate. And cashing in while the market is up seems like good time to do so.
Look at it on the bright side. You don’t have to pull you hair out when the market eventually tanks again due to market cycles.
2) Tax planning
Tax planning with real estate is a topic that does not gain enough attention with the glamor usually reserved for flipping and premium rentals.
Taxes influence property investment decisions more than what most people think.
In certain countries for example, foreigners are double and even triple taxed for buying and/or selling. And often times, changes in regulations allow investors to exit with minimal or no tax within a specified window.
It also goes without saying that the higher a property’s value appreciates, the more capital gains tax a seller will incur.
When opportunities arise where you can minimize or completely sidestep taxes with rebates or exclusions, I suggest that you seriously consider the option of exit.
The chance might never come again any time soon.
3) Too much work
While you might be a full time landlord, the majority of landlords do it on a part time basis. They have their office jobs while managing their rental properties on a part-time basis. Hoping that one day, it can eventually provide a full time income.
Even if their rental properties are generating profits, the amount of work they have to put in could be too much to handle. And hiring a property manager makes no financial sense at all.
The best option then could be to relief themselves of these extra headaches by liquidating.
They could very well make more money by spending that time fully focused on their jobs.
4) Pass on the wealth
As you could probably intuitively suspect, real estate can be a very complex legal item.
Leaving real estate as inheritance can be a messy affair… especially when there are many egos in the family. It can get real ugly real fast.
So sometimes, it is best to leave most of the inheritance in cash. This is so that there is a less likelihood for family members to sue each other just because one party want to sell while another wishes to hold.
Disputes like these can be avoided of the real estate is liquidated and allocated to specified family members in cash.
The last thing you want to see is your family fighting each other for the wealth you accumulated for their happiness.
What an irony.
5) Use the property themselves
It’s not a surprise to see a property investor rent out his most desirable property instead of living in it himself. These are the small sacrifices property investors like to make. Some even see this as a trait of wisdom.
But eventually, that penthouse in the city center, cottage, or waterfront home with a breathtaking view can be too much to ignore anymore.
It’s about time they moved in and enjoy the luxurious property for themselves.
They could be done with the landlording business, but life living in it has just started.
Different investors will have different investing profiles, and therefore a different objective to where they want their business to go. And exiting the real estate business if often not a result of failure, but to move a level higher in term of life goals.