How Long Should You Hold onto an Unwanted Property?
In the real estate investment world, we call them “unwanted” properties. Don’t mistake that for “not valuable.” These are houses that you own, but don’t have the time or energy to deal with. It may be an investment property you bought or a home that you inherited. Ultimately, it’s up to you how long you decide to hold onto an unwanted property. You might be collecting monthly rent payments or perhaps the house is just staying vacant as you let the equity grow over time.
There’s certainly nothing wrong with holding onto valuable real estate, but it could be costing you more than you are making on it—especially if it’s not being rented out and generating income for you. You still have to pay property taxes on the house. You might be paying for utilities and general upkeep, as well. Sure, you can write off some of the expenses and losses on your income tax returns, but you need to look at all the numbers and decide if the property is worth keeping.
We see it all the time. A real estate investor buys a property and then shifts his or her focus to a new market. They don’t have the time or resources to take care of this house or deal with tenants and property managers, yet they are unsure of selling it. The same goes for those who inherit real estate from a family member. It’s a nice financial asset to be given, but it’s also a bit of a burden. They don’t quite know what to do with the house once the deed is in their name.
Whether it’s truly an unwanted property you wish to get rid of or it’s a house you don’t have any big plans for, you will want to consider selling it and moving on. This is especially true if you own the property and can use all the cash earned from a sale to apply toward other investments or expenses.
Let’s say you have decided to sell your unwanted property. You have numerous options to consider:
Open Market Sale
Of course, if you are in no rush and don’t mind spending a little out-of-pocket to list the property properly, you will probably want to sell the house on the open market through a real estate agent. This will likely net you the best sales price and profit. It will take some time to get the house ready, market it, review offers and close the transaction, but that’s just what needs to be done if you want maximum resale value.
Sell It Yourself
You can try to sell the property yourself. If you are an experienced real estate investor, you may be used to private deals and be good at negotiations. If you don’t know what you are doing and don’t live in the area where the house is located (common with inheritance situations), then this may not be the best solution for you.
You can sell the house to a fellow real estate investor in a cash deal. This is the simplest and fastest method to unload an unwanted property. Investors are bringing cash (or other solid investor financing) to the table, so the sale can close within days or weeks rather than taking months to complete. You won’t get as high a sales price, but you will save on real estate fees and other ownership costs that have to be paid until the house is officially sold. Another benefit of a cash sale is that buyers are willing to absorb any risks and purchase the house in as-is condition. This saves you time and money on repairs.
If you own the house free and clear or you don’t owe much on a loan, you can consider some different creative financing options. You will have more flexibility and negotiation power in this case. These could be deals made with a regular buyer or likely with an investor who wants your property and is willing to work with you to get a deal done. You might want to look at owner financing, where you essentially act as the bank and offer an interest-bearing payment plan to the buyer. The final sales price may not be as high as an open market sale, but you can make up for at least some of it with the interest payments. We’re not talking 30-year loans here, but maybe a year or two of interest and a quicker principal payoff by the buyer or investor.
A lease option is another way to go. This is similar to owner financing in that the buyer would be making payments, except the initial payments would be a lease on the property. They do not take over ownership right away. They would lease for a specified period (often 6-12 months) and then have the option to buy the property at the end of the term.
The point is, if you have an unwanted property and you have no long-term plans that make it worth holding onto, you should at least give some thought to selling it as soon as possible. That will free you from the burdens (and costs) of ownership and ultimately put a good chunk of cash in your pocket. It’s important to explore all your selling or rental options, and then make the decision that’s best for you and your financial situation.
PropertyLark specializes in cash purchases of distressed and unwanted properties, but we always work with our sellers to determine the best solution based on their situation. Whether it’s utilizing a creative financing option or recommending a traditional open market sale, our team will help you figure out what makes the most sense for your house. Contact us today to get a fair cash purchase offer or to explore your other house selling options.