When To Rent Or Sell A Property?

Other than the one you are currently occupying, are you currently owning any real estate properties but do not know what to do with it? Let us explore...You basically have three options, that is, rent, sell or hold. If you decide to rent it out, i congratulate you because you now have a passive income generating asset that gives you residual income until your lease expires. However, you need to take into consideration other operating expenses such as maintenance, service charges, loan installment (if any), assessment, real estate broker fees, taxes and other general upkeep expenses. After deducting all these expenses, your net income should determine whether your rental is in a positive or negative category, normally termed as positive or negative cash flow. Ideally, you should rent out the property which gives you positive cash flow. (On the flip side of the coin, you probably should not purchase a property that does not give you positive cash flow in rental yield, unless you are confident that the piece of property has good potential to generate an attractive capital return!) In addition, you should also watch out for the rental yield, versus the average return if you were to park the money in a low risk fixed income money instrument such as fixed deposits in a bank. For example, if interest rates with your fixed deposit is 3%, then you should look for net rental yield that more or less double that!

In the case the property could only generate negative cash flows and/or unattractive rental yield, it is probably better to dispose it off in the market since you could use the money to later purchase a piece of property that generates better cash flow or return.

What if you feel confident that this piece of property will generate good capital returns if you hold on to it? Well, you could always do so as long as you assess the probability of this to happen, taking into account the burden of holding cost. The worst to happen is if you get it all wrong and you end up holding on to a piece of property that does not generate any returns!