As a real estate investor, there may come a point when you start thinking about selling one or more of your income properties. Maybe you want to free up cash to venture out into something new, like real estate investment trusts (REITs). Or maybe that property hasn't been generating the rental income you were hoping to get from it, and you'd rather try your luck with a different property in another neighborhood.
No matter your reason for contemplating a sale, you should know that now's a pretty good time to put a home up on the market. In fact, if you wait too long, you could end up missing out on a key opportunity to score a major profit.
Why now's the right time to sell
Right now, demand for homes is huge. The reason? Mortgage rates are sitting near historic lows, and a lot of buyers want to get in on the opportunity to purchase a home while interest rates are affordable.
The demand for homes is so high that buyers are willing to pay more money than ever to snag a place of their own. In July, the national median price among active real estate listings was $385,000, reports Realtor.com. That represents a 10.3% uptick from a year prior.
Not only that, but listed homes are flying off the market. In July, the typical home sat on the market for 38 days, compared to 60 days in July 2020.
But high prices and strong demand aren't the only reasons why it pays to get moving on listing your income property now. A big reason sellers have managed to command such high prices is that there's been a limited supply of available homes on the market. But that supply is slowly increasing.
In May, home listings on Realtor.com rose 3% compared to April. In June, they rose 9% compared to May. Furthermore, in June, new home sales dropped to their lowest level since the early part of the pandemic.
This gradual rise in inventory is exactly why now's a good time to sell. The basic laws of supply and demand tell us that when there's not enough of a given commodity to go around, buyers will pay more for it. If you want to capitalize on that demand, now's the time to list your property -- before the competition ramps up.
Another factor is that bidding wars on properties have been on the decline. In June, the share of listed homes facing bidding wars was 65%, per Redfin. In May, it was just over 72%, and in April, it was just over 74%.
Obviously, that's good news for buyers. But when you're on the selling side of the coin, bidding wars are your best friend. And if you want to increase your chances of having your property land in one, you'll need to list it when overall inventory is still scarce.
Finally, a big reason many homeowners have held off on listing their properties over the past year and change boils down to uncertainty around the pandemic and economy. The delta variant certainly isn't helping matters with regard to the former.
But on the economic front, things are improving. In July, the national unemployment rate reached its lowest level since the start of the pandemic, and 943,000 jobs were added to the economy. That alone could spur more listings in the near term.
The bottom line
If you're looking to sell an income property, the longer you sit tight, the more competition you risk facing. Now's a great time to sell a home, so if your gut tells you to unload a property, don't wait to do it.