Selling your rental property? Here are the key questions you need to ask yourself first

Perhaps you bought a rental property two years ago and you've been wondering if it's the right time to sell. Investing in real estate is best done if you can hold the properties long-term, but there will likely still come a time you need to sell.

When deciding if you should hold on to a property or let it go, be sure to consider your financial circumstances, the state of the economy and rent prices, the rental market in your area, and more.

Let's look at some of the key factors before deciding if you should sell your rental property.

One of the signs you should sell is if there's a seller's market.

Of course, you don't want to sell every time it becomes a seller's market, but if other conditions are right and you want to get the most money out of the property possible, paying attention to whether it's a seller's market or a buyer's market is important.

A seller's market is when the demand for properties exceeds supply.

A seller's market means there aren't enough houses or properties for sale to meet current demands of buyers. As Zillow explains, this can mean a faster sale, fewer price cuts, and the potential to get asking price or even significantly above your asking price if you sell.

How long should you keep a rental property before selling?

Investors want to know how long to keep their rental properties, and there isn't really a fixed rule, although in general, the longer you can hold a property, the better.

Due to the expense and effort involved in buying property and finding tenants, you should plan to keep a rental property for at least a year, preferably longer.

If a rental property isn't making enough in rent to be worth the investment, selling sooner may be a wise idea.

Here are a few of the top signs that it's time to sell your property:

-It's a seller's market.
-Your property isn't making you money.
-Property value has appreciated.
-You need the capital you'd gain from selling.
-You've found a better investment opportunity.
-It's time to diversify because too much of your net worth is in real estate.

Again, a seller's market can be a motivator to sell even before you'd planned. If your property could likely fetch a bigger profit now than if you waited a few years or months, and you don't plan to keep it for many more years, go ahead and sell.

Sometimes a rental property doesn't make owners enough money, whether due to frequent tenant turnover, excessive repairs, or other factors. Then it can be better to sell. If your property value has gone up faster than rent prices, that's a sign to sell also.

You may also simply need the money from the sale. Your employment or other financial circumstances changing can mean it's time to sell. Also, you may decide to diversify into something like a REIT , index funds, or other investments that could work better for you.

Signs that you should not sell a rental property:

For signs that you should not sell a rental property, consider the reverse of the previous conditions.

-It's a buyer's market.
-You're making good monthly cash flow.
-The property value hasn't gone up significantly.
-You don't require any added capital right now.

You might also choose to sell a rental property if you're simply tired of dealing with it or circumstances have changed to make it unsustainable. Running a rental business requires a lot of time and money, even if you can afford to hire a property manager.

You may want to find more passive income opportunities instead.

This article originally appeared on 2.14.23.