In my experience, success in real estate investment often comes down to two very basic things: knowing when to buy, and knowing the best time to sell real estate. In fact, it is a decision that is at the heart of every kind of investment strategy. As markets rise and fall, timing is everything. But knowing when to hold on to a piece of real estate – and when to get rid of it – is a fine art.

With that in mind, I thought I’d share just a few thoughts on how I think about this challenge. Of course, much of it comes down to experience – but the following should help you to think more clearly about whether you’re making the right decision.

So, when is the best time to sell or hold a piece of real estate?

When it is the right time in your life

Usually, I’m very careful to avoid bringing too many personal considerations into my investment decisions. These are two areas of my life that I like to keep separate.

And yet I also know that this isn’t always possible. We invest, after all, to make money. And that money is usually then used to improve our standard of living in some way: to fund our retirement, to give us a regular, reliable income or to help us to buy a better home for our families.

What does this have to do with choosing the right time to sell a piece of real estate? Well, the fact is that personal circumstances change. We get married. We get divorced. We have children, or we get a new job and have to move to a different area.

All of these life events can have an important impact on our financial lives too. Perhaps we might need to free up some cash quickly or sell a property to generate some capital for another purchase.

So, our personal and professional lives do intersect sometimes. And the fact is that when they do, these personal pressures to sell will usually far outweigh any financial arguments for or against a particular sale.

The best time to sell real estate is when it fits your strategy

Changing personal circumstances aside, the other key indicator for spotting the right time to sell is when a sale aligns with your investment strategy.

I’m assuming here that you have a strategy – it is a fundamental part of building a successful career in real estate investment, and I’ve spoken in more detail about it here.

Investment strategies come in all shapes and sizes and are most often defined by your financial goals and your appetite for risk. When it comes to real estate, there is a good chance that you will be looking at one of several options.

You might be following a ‘fix and flip’ strategy, buying properties, quickly improving them and then selling them on at a profit. Or, you might be looking at holding them for the longer term. In this case, you’ll either be looking for a regular rental income, or you’ll be focused on selling the property when the market value has increased.

Whatever strategy you’re following, use it as the baseline against which to measure all of your buying and selling decisions. Will selling your property now take you one step closer, or further away, from your financial goals? Assuming you’ve set an achievable strategy, if your strategy says now is the right time to sell, then it is.

All that said, it is also important to remain flexible and agile in our strategic approach. The real estate market today – in fact the modern business environment as a whole – demands it. Always remember that is the financial goals themselves that you’re working towards that should be set in stone, not the strategic route you’re taking to get to them.

So, while it’s true that the best time to buy or sell is when it fits with your strategy, the most important consideration again is whether buying or selling helps you to achieve your financial goals. Always sense check your decisions against what you’re ultimately trying to achieve through your investments.

When you see a lot of similar properties about to enter the market

Supply and demand heavily influences every market. Understanding how this works in real estate is a crucial part of knowing when to buy, when to hold and when to sell.

For example, you might be a residential real estate investor who owns several rental properties for professional tenants in a particular area. Currently, there aren’t many properties of this type in the area you’ve investing in. You’re enjoying high occupancy rates, plenty of demand for your properties and a regular income.

Then, you hear that a planned building development will soon dramatically increase the number of this kind of properties in the area. Soon, the gap between supply and demand will narrow – and prices will level out as a direct result.

The key to managing this kind of risk is to keep your ear close to the ground. Build a trusted and reliable network of local experts who will be able to give you a clear idea of current and future trends. The bottom line is this: if the market is about to be flooded with similar properties, sell before this happens. The increase in supply will almost certainly negatively impact the value of your portfolio.

Hopefully this has given you a sense of just a few of the ways to approach the question of whether to sell or not.

One final point however. As a professional real estate investor, I’m obvious heavily biased towards investing in property. Yet a final consideration to take into account is the need to diversify beyond real estate.

Diversification is a golden rule of good investing, of course, but this also means investing in different kinds of assets. Not just in different asset types within a particular sector.

So, my advice is that if the majority of your overall wealth is tied up in only one asset class – such as real estate – it might be time to sell some of it and consider diversifying into other areas such as stocks or bonds to spread the risk.