Why should I sell my multi-family apartment complex?
If you follow us on our socials, then you have probably seen our blog on how and why to begin investing in commercial properties. But for those of you that have started, how do you develop an exit strategy? Any good business person knows that one of the best parts of an investment deal is the exit strategy. It is how you ensure that your investment is making you the most money possible.
The first thought that probably comes to mind for many of us when we discuss exiting a business within the commercial property is to sell that property. If you are working with a massive property and planning on heading into retirement, this may be a good option for you. If you are looking towards less responsibility and scaling down, selling is an easy solution that will help you get there with a nice payout. Property prices typically appreciate every year and if you entered the purchase on a good deal, or if you have increased the property’s worth since buying it, you have a high chance of making a sizable profit on your sale.
However, with selling comes paying taxes. If you are an investor that is just getting started and is looking to continue growing your investment, then selling is probably not the best option for you.
Exchanging however is a little different. The concept here is growth. If you sell your property and recognize a new one within a certain time you can utilize a 1031 exchange. A 1031 exchange is a swap of one investment property for another like-kind, that allows capital gains taxes to be deferred. That means you will not lose your current profits to taxes and you will begin sizing up your investment with a new property. Always speak to a tax professional or Real Estate Attorney to discuss your options.
Remember, the investment game is all about maximizing. Whatever your end goal is, retirement, legacy, or passive income, there are ways to continue scaling up. With the right commercial real estate agent, you can get this done with enough turn-around time that taxes should be the least of your concerns.
Usually, when discussing money and finances, the words get big and fancy and it can get tough for most people to understand in-depth the concepts being thrown around. This is also the reason why most property owners do not realize they can refinance their properties to make what is essentially a free return on their original investment.
The bare bones of what you would be doing with this option are taking a new mortgage out on the property in place of the one you initially took out to purchase the property with. You will be replacing the initial agreement you made with the bank for something new, typically with a lower interest rate or a better deal. The bank you took out the mortgage with will have guidelines on how to do this, but it is a great way to lower monthly payments and increase your passive income on a commercial property. Ask me about a great real estate lawyer who can guide you through this.
After a year like 2020, the world is aware now more than ever how risky it can be to have all of your eggs in one basket and just how important it is to have multiple revenue streams. The more invested you are into a single property, the more at-risk your investment is considered to be. One of the best reasons to sell your small multi-family apartment complex is because the return you will receive on this investment could be the key to setting you up with higher returns and better security. If you are interested in learning more about investing in real estate syndications, click here https://www.melissadonnahoe.realtor/blog/benefits-of-investing-in-syndications/ to access my previous article.
In my professional opinion, the best way to go is to exchange your properties to continue maximizing your passive income. If you want to start thinking about your exit strategy or get an idea of how to grow your passive income through commercial investments, your best next move is to contact a commercial real estate agent.
You can contact me, Melissa Donnahoe, at firstname.lastname@example.org. Let’s invest in your future, today!