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The purpose of buying rental properties is to keep them long-term, right? Not always. Every real estate investor has their own strategies. Some look for short-term gains. Others strive to accrue thousands of units and retire. There are great reasons to sell your rental property. In this post, we’ll look at the opposite and uncover four undeniable reasons to keep them.
1. Steady Income Stream
Rental properties provide a consistent income to their owners. Monthly rent payments can help cover mortgage payments, property taxes, and maintenance costs – all major expenses that can add up quickly. Over time, as rents increase, your income can grow.
This steady cash flow can be especially valuable in uncertain economic times. It's like having a financial safety net. Additionally, rental income can help diversify your investment portfolio. Unlike stocks, which can be volatile, rental income is relatively predictable. This consistency can make financial planning easier and more effective.
We spoke to Alex with SD House Guys, a real estate investing company based on the West Coast. He explained, “Cash flow is why lots of people get into real estate. Our company SD House Guys found out the hard way that when you have a mortgage on the property, the cash flow isn’t nearly as good. It’s harder to retire off your rentals when you have debt tied to them. Sometimes, it’s worth exploring the option of selling some rentals off and consolidating your portfolio.”
2. Property Appreciation
Real estate often appreciates over time. By holding onto your property, you can benefit from its increased value. Selling now might bring a quick profit, but waiting can lead to even greater returns. Consider the long-term potential. The longer you hold the property, the more it could be worth.
Historical trends show that real estate typically outperforms inflation. Your property’s value may grow faster than the cost of living, enhancing your investment. Plus, a well-maintained property in a growing area can appreciate significantly over time.
3. Tax Benefits
Owning a rental property comes with significant tax advantages. You can deduct mortgage interest, property taxes, and operating expenses. Depreciation is another benefit. It allows you to spread the cost of the property over several years. These deductions can reduce your taxable income, saving you money every year.
If your rental property isn’t doing so hot, you can save money on your taxes by showing a loss. It’s unfortunate but common, especially as investors grow their rental portfolios. For example, a rental property could lose out on 6 months of rental income because squatters broke in. Trying to remove squatters from a property can take weeks if not months. Highlight the losses that you sustained from that time period on your taxes.
4. Building Equity
Every mortgage payment increases your equity in the property. Over time, you own more and owe less. This growing equity can be a valuable asset. You can leverage it for loans or lines of credit. Equity can also provide financial security in retirement. It’s a way to build wealth steadily and reliably.
Additionally, owning a property outright means you have a tangible asset that can be passed down to future generations. This can create a lasting legacy and provide financial stability for your family. You can hire a property manager to take care of the house so you don’t have to be that involved. Real estate is a powerful way to start earning passive income and long-term equity.