When should you sell your commercial property? The answer is simple, but knowing when the answer applies to your situation . . . not so much. Basically, though, there are two times when it’s right to sell your commercial property in Philadelphia: 1.) when it looks as though the property may begin to cost you money, and 2.) when you stand to make a lot of money if you sell. But when, really, are those times? To help you arrive at an answer, here are 6 signs you need to sell your commercial property in Philadelphia.
1. Little Depreciation Advantage
Maybe you’ve been told that you shouldn’t sell your commercial property in Philadelphia even though it isn’t producing maximum income because the tax advantage of depreciation will offset that loss in under-maximized income. But that’s probably not the case. Actually, when depreciation is used in this way, the benefit is fairly minimal, so it may be better to sell.
2. Earning Potential Diminishing
One of the two easily identifiable periods in the life of a commercial property when selling is right is when the property is experiencing diminished earnings or has lost its earning potential. When the property begins to make less money or no longer makes money, then it’s time to sell your commercial property in Philadelphia. You could, of course, invest money in improvements and hope to attract more and better tenants at higher rents, but this seldom works out. So most experts agree that selling at this point is a better financial decision.
3. Earning Potential Maxed Out
The other time when you should certainly sell your commercial property in Philadelphia seems counterintuitive on the face of it. For that time is when the property is bringing in the maximum it can potentially earn. It would actually seem that you should hang on to it if it is earning the maximum. But this is also the time when you can sell at the highest possible price. Basically, there will never be another time you can sell for as much.
4. Leveraging and ROI Become Concerns
Another indication that you should sell your commercial property in Philadelphia is when the property is underleveraged. Overleveraging is a risk, but under-leveraging can cost, too. You should keep in mind that the more equity you have in a property, the lower the generated-income ROI will be. For that money in equity could likely be put to better use leveraging other properties for a higher ROI.
5. Investment Goals Change
Sometimes, your investment goals change, and that is often a sign you need to sell your commercial property in Philadelphia. Your investment goals simply must play a large role in your investment decisions, including the decision to sell. Sometimes the local commercial real estate market undergoes change, your investing interests shift, or your lifestyle changes. Whatever the reason, your investment goals often change, and how you intend to reach those goals will also change. And those changes can be a good indication you should sell your commercial property – if, that is, that’s the best way for you to reach your new goals.
6. Good Help is Available
Heed these 6 signs that you need to sell your commercial property in Philadelphia, and you’re likely to make the right selling decision. But selling commercial property is a big decision and requires consideration of these and many other factors. Experienced commercial real estate professionals can be a huge help to commercial real estate investors (you, for example). These qualified professionals can help you make those tough decisions about which properties to sell and which ones to hang onto.