Blog Post

When should I decide it is time to sell my rental?

Dustin Edwards • July 3, 2020

At Some Point the Decision to List for Sale or Continue for Rent Should be Asked

For Sale or For Rent - You Decide
Owning a rental property is usually filled with a bit of trepidation. After all, what happens the first time the property is vacant? Of course for many that decision doesn’t even alarm them, but there always comes a time when people ask...should I sell my rental?

While we aren’t CPAs, you can look up the tax code and find out that you can sell a primary residence with a gain of up to $250,000 as an individual tax free or up to $500,000 if you are married. tax free. This rule applies if you have made the property your primary residence for at least 2 of the last 5 years. In Southern California where the gains can be in the 5-10% range annually over a 5 year where the median home value in Los Angeles County was valued at $650,000 in 2020, then taking a tax free gain can be pretty tempting. If it were only that easy then many people might sell each time within the 5 year window, so why do so many decide to keep their rentals? We invite you to consider a deeper thought process to help you decide what is right for your goals.

Selling Outright
When we work with property owners, sometimes it is their first rental and that is great. At times that means they use that first rental as the foundation of a real estate portfolio and at other times they decide that owning a rental just isn’t for them. Regardless of their decision we are here to help them in their mission

If selling is the right decision, we do have a division that is designed to help our rental owners sell their investment properties. Especially those owners who meet the requirement of having occupied the property 2 of the last 5 years as their primary residence we understand the objective of taking those tax free gains vs. taking the long term gains that are offset by depreciation.

For those owners taking the gains on their investment property the main question we ask is “what is your goal with the gains from this property?” While certainly people don’t have to answer, our main purpose in asking the question is ensuring there is a plan in place after the sale. With any of our clients we want to make sure we help them achieve their goals, even if that means we don’t benefit long-term.

1031 Exchange
For many long term property owners this has proven to be a great strategy. A 1031 exchange allows you to defer the taxable gain. In other words you could have a gain, north of $500,000 (if you were married) and delay the taxable gain. For many property owners, especially those in Southern California, it can allow you from being a single family rental owner to a 2-4 unit property owner.  

For example, just envision that you are the owner of a $700,000 single family home owner in Long Beach and you have a dent position of $150,000. Your gain, even with fees, would likely be north of $500,000. Provided that you are looking to put a minimum down on your next income property that would allow you to invest in a property north of $1,500,000 giving you access to a wide array of real estate options (2-4 units or even larger) throughout Long Beach.
End of Depreciation Period

The decision to sell might also come due to the end of the depreciation cycle of your residential income property. The tax code (please check with your CPA) allows a depreciation expense for 27.5 years. If you have owned a residential income property, especially in Southern California, for 27.5 years it is likely that you have a large gain available and it could just be time to sell. Of course if you are in that position we would recommend meeting with a CPA and even including us to explore your options in up leg properties to see if a 1031 exchange might be best.

Whether you want to take a tax free gain, are considering a 1031 exchange or you are at a crossroads due to the end of depreciation we understand the decision isn’t an easy one. When you want to find out more about your options invite you to call us today (562) 888-0247 and we can share our experience. When you are confident you want to continue to rent out your property we invite you to fill out our Free Rental Analysis where we perform a comprehensive comparison to share your rental stacks up to the competition.

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By Dustin Edwards November 18, 2024
Be aware of these 3 common issues when the rainy season arrives at your rental property.
Cold weather can come fast and strong so it's best to ensure your property is ready for this climate
By Dustin Edwards November 12, 2024
It's important to prepare your rental properties for the colder weather. Although we don’t need to prepare for snow and freezing temperatures, we do need to prepare for the cold and rain. By ensuring your rental is cozy inside and prepared for the fall season , you can not only reduce energy costs for your tenant but also maintain your rental property value. Today, we’ll go over three signs your property is ready for this upcoming cold weather.  Sign #1 Proper Weatherproofing During the colder seasons, it's much easier for a tenant to notice any cold spots in your rental. Well-insulated doors and windows can not only help maintain the warm temperature but also prevent it from lowering. It can also prevent cold spots and drafts, which can help with tenant satisfaction . Doors and windows should be properly sealed and insulated to prevent drafts and maintain proper temperatures. A visual inspection of the weatherstripping around doors and windows to ensure they’re intact is a great place to start. If damaged, consider replacing them, as trying to seal gaps can be tricky and rarely lasts. Other seals should also be checked, as well as any areas that need to be caulked in order to keep cold air out. Insulation during the summer helps keep the cool air in, and during the winter, insulation in the halls and attics helps retain desired heat. Hot air rises, and if there isn't adequate insulation in the ceiling, heat will continually be lost. Luckily, adding insulation to an attic is not uncommon and typically only requires a day or two for installation. Sign #2 Energy Efficiency Measures During the winter, it's not just the cold you need to keep in mind. As days are much shorter, there is less sunlight to keep the rental warm and more hours of darkness. For this reason, it's a good idea to keep energy efficiency in mind when preparing for the cold weather. Energy-efficient lighting or smart lighting helps reduce overall costs since your tenant will likely use electricity to keep warm. Ensure your outdoor lighting is rated for external use, as this can provide crucial illumination during longer nights. Draft guards on doors and windows help reduce the load on your rental’s HVAC system which can significantly improve its lifespan. This is also a great time to replace filters and clean the ductwork in your rental to improve energy efficiency. Additionally, consider installing an insulative film on older windows, which helps retain heat and keep rooms warmer without the need for extra heating. If your rental has a programmable thermostat, ensure it’s in working order, as this can help tenants manage an energy-efficient heating schedule more easily. Sign #3 Property Exterior Southern California is a great place to settle down, and while we don't need to worry about snowfall or deep freezes, ensuring the exterior of your rental property is ready for the cold weather is important. With our cold season mainly bringing with it rain, inspect your rental property’s rain gutter system . Remove debris from drains and check for leaks or signs of wear and tear. Walkways should be clear of debris and well-lit. This may require you to prune and trim trees and bushes that may leave behind leaves. When combined with rainfall, a single wet leaf can cause someone to slip and hurt themselves. Consider adding non-slip mats or tape to areas where people may have tripped in the past. Much like during the hotter weather, it's important for your rental to be ready for fall and winter. By keeping your property ready for any weather Southern California has to offer, you ensure your rental property and tenants will provide steady rental income every month. If you need help preparing your rental for the cold weather or if you need help managing Beach City rental property, we invite you to call us today at (562) 888-0247 or complete our Owner Application online .
By Dustin Edwards November 4, 2024
Owning a rental property in a beach city like Long Beach, CA , offers a number of advantages, like great weather and a strong real estate market. However, the cold ocean breezes can pose some challenges for landlords and tenants, making it convenient for property managers . Although the weather is generally great, these ocean breezes can sometimes make properties drafty and uncomfortable during the fall and winter seasons. Today we’ll go over four measures that can improve tenant comfort and protect your investment from the cold ocean breezes. Weatherproofing Againsts Drafts Drafts are caused by gaps between doors and windows which can make a rental feel colder than it is. This leads to unnecessary energy use and tenant discomfort. Sealing these gaps is not difficult and quite doable for a landlord who doesn’t mind getting their hands dirty. Replacing worn weatherstripping and adding fresh caulking to seal minor gaps blocks air from permeating the property. For additional protection from drafts, you can provide your tenant with inexpensive door sweeps. Improve Heating Efficiency Having efficient heating is crucial to countering the cooler ocean breezes while keeping costs low. Schedule regular maintenance for your HVAC system , such as replacing filters, cleaning vents, and cleaning the compressor to keep it running smoothly. This not only provides more efficient heating, it also extends the life of your HVAC system. Installing a smart thermostat is another way for tenants to adjust heating schedules efficiently. Protect Outdoor Spaces Outdoor areas such as patios, balconies, and even porches can oftentimes be exposed to the coastal breezes. This can be an issue in the long run, especially for rentals next to the beach , as the wind can carry sand and salt, which can accelerate the deterioration of metals, wood, and paint. This can be mitigated by adding windbreaks to the property, such as lattice panels or outdoor curtains, to create a more comfortable and functional outdoor space. Exterior finishes will require more frequent maintenance. This includes resealing wood and metal surfaces. As well as repainting is important to protect against wear from salt, sand, and moisture. Wind Mitigating Landscaping Much like with the curtains and lattice previously talked about, the landscaping can also be used as a windbreak. For example, planting wind-resistant shrubs or trees alongside exposed areas creates a natural barrier. This helps reduce the impact of the gusts of wind hitting the property. Many native plants thrive in coastal climates while also requiring minimal maintenance. While expensive, the results can greatly improve your rental’s longevity and curb appeal. Alternatively, you can strategically place planters to provide protection. Durable Furniture Furniture and fixtures exposed to the cold coastal breezes need to be able to withstand that wear and tear. Choose resilient materials such as treated wood, powder-coated metals, and outdoor-rated plastics. These are less prone to being damaged by the salt or wind. Furniture that is lightweight should be secured or anchored in place to prevent it from being blown away. By investing in durable furnishing, you can provide tenants with a comfortable and functional outdoor space for years to come. Protecting your beach city property from the cold ocean breeze doesn't necessarily require extensive renovations or investments. Try to focus on any relevant feedback from your tenant, this can help you pinpoint what part of your rental needs attention. If you need additional help protecting your rental property from the cold ocean breezes or if you need help managing Beach City rental property, we invite you to call us today at (562) 888-0247 or complete our Owner Application online .
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