Before making any decisions about whether you want to sell your San Francisco rental property right now, let’s understand the current San Francisco real estate market and how your property fits into it. For several years now, we’ve seen fluctuating property values and demand, driven by various economic factors and changing demographics. Increasing regulations and legal requirements also have investors wondering if keeping their rental property is really a good idea.
We believe in a buy-and-hold strategy, generally speaking. It’s the best way to earn recurring and consistent income while the value of your asset appreciates. However, investment goals change and so does the market.
Here’s how to know if you should sell now or wait.
San Francisco’s Real Estate and Rental Markets
After a period of sustained growth, San Francisco property values have shown signs of stabilization. While this may be positive for buyers, it could mean that the peak selling prices are behind us. There’s always a demand for rental properties, but we have seen increasing vacancies, which may make selling an attractive option for rental property owners.
Something else to consider about the current market is that mortgages are still pretty expensive. Interest rates haven’t dropped yet, and that could affect the pool of potential buyers who may look at your property.
Factors to Consider Before Selling a San Francisco Rental Home
Consider your investment goals and your current financial position. You never want to sell at a loss. While every investor will have a different list of reasons that they should sell or hold onto their property, here are some general factors to consider as you make this decision:
- Rental Income vs. Selling Price
Evaluate the rental income you’re generating from your property compared to what you could gain by selling it. If your rental income is steady and profitable, holding onto your property might be more beneficial in the long run. Conversely, if property values are high and you’re looking to cash out, selling might be the way to go.
- Tax Implications
Selling a rental property can come with substantial tax liabilities. Capital gains tax and depreciation recapture are two critical considerations. Consulting with a tax advisor can help you understand the financial impact of selling your property. If you want to sell a specific property but not exit the market entirely, a 1031 exchange might be a viable option for you.
- Evaluate Property Condition
Is your property in good condition, or does it require significant repairs and upgrades? A well-maintained property will fetch a higher price and sell more quickly. If substantial improvements are needed, consider whether the investment is worth the potential return.
- Market Timing
You know that the real estate market is cyclical, with peaks and drops throughout the year. Typically, spring and summer are the best times to sell, as more buyers are actively looking for properties. However, market conditions can vary, so it’s wise to stay updated on local real estate trends.
Deciding whether to sell your San Francisco rental property is personal, and the right time to sell is when it aligns with your financial objectives and market conditions. You’re looking for a profitable outcome.
We can help with our decades of experience in San Francisco property management and real estate. Contact us at Gordon Property Management.
