Q: My commercial property is performing well, but I see a lot of opportunities available in other real estate. I hesitate to maximize my credit, but it seems a good time to buy. I’ve also thought about selling to finance acquiring more property. How can I tell if it’s a good time for me to sell?
A: The custom of holding onto income property til death do us part, more or less, is rapidly declining, along with the changing profiles of ownership and of how business can profit in this century. Long gone are the days when only the wealthiest, landed gentry owned most, if not all, commercial real estate, passing it on, through the centuries, to their heirs.
From successful business owners purchasing their own buildings to small investors buying multi-family properties, commercial land ownership has become more diverse, and so has its management as an investment tool. The pivotal question is: when is the right time for you to sell? For business owners who have acquired their establishment’s address, there may even come a time when your best choice is to sell and lease your space from the new owner.
Investors tend to diligently research commercial property purchases, yet often neglect to consider when selling will best fit their portfolio. The commercial real estate landscape has evolved beyond the mere “buy low, sell high” strategy of old. While still often a rule of thumb, other aspects also influence opportune times to sell.
Most commercial real estate investors have difficulty ascertaining when to sell. In order to clarify the process, several benchmarks can be looked to as deciding factors. Investors may consider selling when any one of these thresholds are reached: property has maximized profits, a more attractive investment opportunity has materialized, tax benefits have been reached, or the financial goal for a specific property has been realized. Considering that investment’s raison d’être is to build wealth, paying attention to these markers, along with local market conditions, informs investors of the optimum time to sell.
Both financial and non-financial aspects are worthy of careful consideration to determine your own best time to sell. Any tax implications must be considered, and your overall investment strategy may include, for instance, collecting rental incomes or cashing out, or both, when retirement rolls around. It’s important to consider whether your property has reached its investment plateau. Has both your structure and the neighbourhood reached its potential? Does it seem likely to? Have your original investment goals been met? When that is the case, and other market conditions support a decision to sell, it is most likely time to make that choice, if continually building wealth is your goal.