Rental households are growing at a faster rate than owner households, which means landlords are at an advantage in the rental market. Millennials are staying in the rental market through their 20s, even into their 30s. Additionally, the Baby Boomer Generation added to the number of rentals by 4.3 million in the past ten years alone. The benefits of keeping your rental property often outweigh the advantages to selling your property. Here are a few reasons why you should hold on to your investment:
As long as your rental property is occupied with tenants, you will have a steady flow of monthly income – while also paying down your mortgage. If you prefer to be a hands-off owner, utilizing a property management company is about as easy as it gets!
There are a number of tax benefits that come with investing in rental properties. This includes depreciation– one of the best benefits you can ask for! Depreciation allows you to deduct the costs of buying and improving property over its lifespan from your taxes, thereby lowering your taxable income in the process. You can also take advantage of the mortgage interest deduction. This means that homeowners can deduct their mortgage interest for home loans with values of up to $1 million. Additionally, when refinancing a property for more than it was once worth, property owners can deduct additional amounts of interest if the funds were used to improve or maintain the property.
A rental property typically gains value when inflation is high and creates cash flow from rents during any economic period. Therefore, owning a rental property is a safe investment and an even better benefit that can make you money during times of high inflation.
To give you the inside scoop, we spoke with Tom Cummings, the co-owner of TJC Real Estate and Management Services. Tom and his wife Kari, own twelve rental properties and are partners in twenty more properties. Tom believes that you should almost never sell your rental property because the pros almost always outweigh the cons.
“The first couple years can be tough, but what usually happens is that a mortgage rate stays flat and rents go up– so that alone can help with cash flow.”
So how do you know when it’s time to finally sell your rental property? Tom would advise you to hold on to them unless a better opportunity comes along. He used last year as an example, “If you had sold last year, you would have missed out on another 10% gain”.
It’s hard to know what the market will be like in five years, or even next year. “It could be at the top of the market now, but next year it could also be at the top of the market. Who knows when it’s going to end? But owners need to keep their properties to get that appreciation.”
Overall, in most cases, the benefits of keeping your rental property outweigh the advantages to selling your property. There will always be a risk involved when it comes to owning rental properties. The key is to remain dedicated to maintaining your property and you will be happy with the results!
Buy. Sell. Rent. Invest. Build.
Feel inspired to move, upgrade or purchase a rental? TJC can help you buy, sell, rent and invest. Having a seasoned realtor on your side to help you through all the steps of any real estate transaction is priceless. Did you know that when you build a new home, there is no out of pocket expenses for you to have a realtor help you through the paperwork, design center, inspections, walk-throughs and closing? We also offer no obligation tours of Aerotropolis, investor ROI discussions, and CMAs for your current home. To learn more, contact TJC Real Estate and Management Services today!
Brought to you by Tara Schumann, Social Media/Marketing Manager for TJC Real Estate and Management Services.
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