Deciding whether to sell or rent out your investment property depends on a number of factors, including the strength of the real estate market, your financial position, and your short and long term investment goals. There are strong arguments for each decision. Today, we’re reminding you to consider cash flow, ROI, tax liabilities and benefits, and the time and effort required to effectively manage a rental property.
Reasons to Sell: Cash Considerations
If it’s a strong sales market for sellers and you have a lot of equity in your investments, you could earn a lot of money by selling your investment property. If you there are other things you’d like to do with the cash, selling is a great idea. Maybe you want to put a child through college or use the money for a down payment on another home. Perhaps there’s another investment opportunity you don’t want to miss out on, and you need the capital. If you can get the price you want for your property, selling can earn you a lump sum of cash and give you the opportunity to walk away from any responsibilities with the property.
Reasons not to Sell: Weak Market
It’s not always a great time to sell your property. If the market is not going to support the price you think you should get for your property, rent it out for a year or two and see how things look in the future. If your property is going to be vacant on the market for months, you’ll end up losing even more money. Don’t sell unless the market and the amount of equity you have earned will make the sale profitable.
Reasons to Rent: Cash Flow and ROI
Renting the property out can provide you with regular income. When you have good tenants in place, rent comes in reliably and someone is in place taking care of the home. Your tenant is also help you pay down your mortgage and cover expenses like taxes, insurance, and HOA fees. The longer you hold onto this investment, the more the home will likely grow in value, setting you up for a profitable sale down the road.
Reasons not to Rent: Managing the Home
Not everyone enjoys the responsibilities that come with being a landlord. You’ll have to find good tenants, collect rent, enforce the lease, maintain your home, and follow all of the ever-changing laws that govern landlords and tenants. You can hire a professional Tampa property management company to take care of all these things for you, but if you don’t have the temperament to have tenants living in your home, and you don’t have the financial reserves to take care of maintenance issues and other expenses, it’s probably not a great idea to rent.
When you’re trying to decide, remember that you’ll probably have to pay taxes when you sell your home, but when you rent it out, you can claim a number of different tax deductions to reduce your tax liability. Even your property management fees are tax-deductible.
For more information, please contact us at Real Property Management Instant Equity. We can help you make the best decision for you and your investment potential.
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