Things to Consider When Selling an Investment Property

Things to Consider When Selling an Investment Property

Purchasing rental properties has become an extremely popular investment strategy.

The real estate market is red hot, and plenty of folks nearing retirement and holding investment property see now as an excellent time to offload their real estate assets and reap the profits.  If you’re one of them, then - tempting as it may be - make sure that you talk to your tax advisor before making that move.


See Relax Tax’s Debt Guide at


Purchasing rental properties has become an extremely popular investment strategy. In fact, experts say that those nearing and past retirement age have accumulated about $6.4 million in net worth tied to those holdings. As attractive as that income is, it can also create responsibilities around rent collection and property management that lose their appeal pretty quickly. It’s no wonder that, between those responsibilities and skyrocketing valuations, many people are looking to get out.

While a sale now makes perfect sense, it’s important to go about it the right way to minimize the tax implications. There are a variety of tax-planning strategies that will provide you with significant benefits. These include:

  • A 1031 exchange – This option would mean exchanging the property that is currently owned and deferring the capital gains by identifying the replacement within 45 days and completing the exchange within 180 days.
  • Investment in an Opportunity Zone – This option allows investment property owners to sell their property and then roll their gain on it into the Opportunity Zone Fund. Doing so provides tax-deferred growth over the next four years.
  • Transfer the property to a charitable remainder trust before it is sold. This process exempts the gain from capital gains tax and allows it to be reinvested, with the original owner receiving the income during their lifetime, and the balance transferring to the charity after they die.
  • Holding off on selling until a low-income year. As tempting as it may be to take advantage of the current market, it may make more sense to hold off until after retirement, when your income is lower and the tax hit may not be as extreme.



See this related post from Dennis HarabinA Special Tax Benefit for Inheritances to Enjoy
Another tax benefit of an inheritance is that a gain from the sale of inherited property is treated as being held long-term and gets the benefit from the lower long-term capital gain tax rates even though the property is not held by the beneficiary over one year.

What’s most important is that rather than jumping into a sale based on your impulse to maximize your profit, you give consideration to the tax implications and take a measured approach that will provide the greatest long-term benefits – or at the very least minimize the tax consequences that would inevitably follow significant gains. Even your Medicare costs can be affected by a big gain, so careful planning is a must.


If you own an investment property and are considering selling, take the time to check with our experienced tax advisors. We’ll provide you with guidance on how best to leverage your position.

Do you need more information? You can reach out to Dennis Harabin at Relax Tax today!


Recommended Readings: 



Relax Tax is your trusted financial partner. 
We obsess about helping people retain more of what they earn. 
We can provide you with a set of solutions for your financial goals no matter your financial situation. If you want to learn more about taxes, obligations, investments, and how to handle them, Click Here to schedule your initial meeting.