Sell Your Rental Property?
This year again, rental property owners are enjoying significant growth in real estate value and in high, growing rental income. It’s the perfect time to become a landlord and keep on being one.
The popular rental income, fixer upper TV shows still attest to the popularity and wisdom of owning rental income property.
You’ve got an incredible financial asset that will produce even more ongoing revenue through 2023 and next 5 years. It’s like being paid to own something. While you could act on your impulse to sell while the market is up, it might not make good business or investment sense.
Rental property is the in thing so there will be buyers for your rental income property. They’ll be delighted to take it off your hands. We think you’ll fare better by keeping it and finding creative ways to grow your rent yields using a property management software that’s designed to do that.
Don’t sell your rental property — upgrade your property management software to upgrade your profit
It’s the Roaring Twenties Again!
Yet the UK, US, Canadian and Australian economies are improving fast, inflation is growing, and demand is increasing for rental properties. Amateur investors might see the quick profits in selling their property and decide to bail out and start partying. Yet, as the pandemic eases, the opportunities to move on are limited. Scarcity in the housing market is going to continue. Construction is suffering.
It might take a few years yet and whatever your plans, it’s going to cost you a lot more in the last half of 2021 and into 2022.
Smart investors know that wealth building is about long term accumulation, leveraging, tax savings, and consistent business improvement. With interest rates so low, these roaring twenties of property management offer further value for property investors.
Your investments are a business. You’re a business. And businesses need to be built on solid, sustainable platforms. There’s nothing more solid or promising than rental property. It’s the pinnacle which is why we wanted to discuss keeping your rental properties, and avoiding a quick buck.
Sometimes You May Have to Sell
It’s okay to calculate the dollars and sense gains, but those numbers will almost never be in favor of selling, unless your property is dilapidated and needs extensive repairs. The other time, sadly, is when tenants won’t pay the rent but continue occupying the unit. And then come the legal expenses. Tough decisions.
Compare rent vs sell with the rent sell calculator on NARPM.
Rent vs Sell Calculator. Screenshot courtesy of NARPM.
It’s at this point that some might consider selling off their golden goose. Landlords with one or several properties have been selling their units. On paper, initially, the capital gains looks good. They might profit $50,000 to hundreds of thousands on the price they initially paid for the property.
Biden may make his proposed capital gains tax retroactive and kill the 1031 exchange. It might be wiser to wait for the Republicans to get back into office and see the Capital gains tax go back down again and items like the 1031 exchange brought back. Patience is needed.
Here’s a few points on why selling a rental property might be a poor financial decision.
25 Good Reasons to Keep Your Rental Property?
- real estate prices don’t seem to be falling
- housing shortage likely will never end, construction costs are rising, and there’s just too much demand
- demand for single detached homes will be intense for many years yet – the work from home revolution guarantees demand, and even in remote cities and towns
- when you sell, you’ll get hit with capital gains taxes (20 to 39% under Biden’s new tax grab), Realtor fees and other miscellaneous fees
- rent prices are on the rise
- mortgage rates and borrowing costs are low
- demand is for rental properties because of high prices and rising mortgage qualification rules
- rentals provide a form of income that is reliable (tenants must meet their lease commitments legally)
- rental properties are worth more because of the added income
- rental ownership provides tax saving advantages
- owning more rental properties provides even greater profit potential
- governments have no commitment to housing development and construction
- new building construction costs and financing costs are rising
- immigration and international student education brings more renters in to perk up demand
- it’s a great retirement asset and you may be renovating and living in it
- helps you achieve an early retirement and keeps on giving you and your family ongoing financial security
- helps diversify your asset and investment portfolio
- it’s inflation proof
- gets you through financially ruinous recessions
- greater financial and personal security (you can always move into your rental if needed)
- allows you income and a home in the US should you want to travel for parts of the year
- it’s easier to get your second and third rental properties if you own one already (financing, bank collateral)
- demands of running a rental business are low (if you use property management software and do it professionally)
- it’s your business and you get to be your own boss!
- gives you boatloads of money to buy more rental properties
- most people become wealthy through real estate and rental properties are the pinnacle of real estate success today
Your precious rental property will only grow in value, whether you’re in New York, or Florida, Texas, California or Arizona. Rental properties are actually the most elite form of investment. Even retail and office properties will start turning a profit after the new economy fully evolves (they’ve had a rough go of it in the last 14 months).
There are few indicators that suggest your rental property will lose its value because over time, real estate keeps appreciating (regardless of recessions and downturns). Stick with your rental property and enjoy tremendous long term gains. And perhaps at some point in time, it may be time to sell your rental property. But let that be for good reasons, not for a quick profit, that gets taxed away.
Get the most value from your rental income property by using the best property management software available — ManageCasa. It’s a professionally designed, powerful, easy to learn and use rental management platform for small to mid sized landlords, and has all the features needed to make managing properties easy and more profitable. Simplicity doesn’t hurt.
Check out more advanced strategy for landlords on our blog.
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