Rental Management Company

7 Reasons To Keep Your Property

Getty 529136403 312011

Becoming a landlord and renting out property is becoming an increasingly popular investment choice for approximately 22 million Americans. Despite perceived risks associated with the housing market, the outlook remains favorable for individuals considering entering or continuing in the role of a landlord. While selling remains a viable option, the advantages of renting often outweigh the benefits of selling property. Here’s why:

 

1. Long-Term Equity

The value of your house upon sale is contingent upon your mortgage status and the housing market’s condition. Nevertheless, trends indicate sustained growth in the housing market, with the median sale price of existing single-family homes increasing by 81% over the past decade. Property owners transitioning into landlords consistently experience significant returns and additional income as rental prices continue to surge.

2. Long-Term Profit

If you can consistently rent out your house for more than your mortgage payment and other expenses, you’ll accrue profit over time. However, this scenario isn’t always guaranteed, prompting landlords to rely on annualized tax benefits, real estate appreciation, and refinancing options to offset any monthly or short-term deficits. Moreover, selling your property during a favorable market can yield substantial returns on your initial investment.

 

3. Tax Shelter

Owning a rental property offers various tax advantages. You can deduct a wide range of expenses, including utilities, repairs, mortgage interest, and property taxes, among others.

 

4. Avoid Loss in a Down Market

If the market in your area experiences a downturn and selling your home becomes unfavorable, you have the option to retain the property and lease it out until a more opportune time arises to sell at a profitable margin.

 

5. Protection Against Inflation

Owning a rental property is not only a secure investment but also a lucrative asset that can generate income even in times of high inflation. It appreciates in value during inflationary periods and generates consistent cash flow through rental income regardless of economic conditions. Overall, it represents a win-win scenario for investors.

 

6. Forced Retirement Plan

At times, we may struggle with the discipline to consistently save or make monthly deposits into retirement accounts. However, owning a rental property demands a commitment to long-term management and maintenance, ideally extending well into retirement. Unlike IRAs, SEPs, or 401(k)s, a rental property has the potential to yield greater returns in both equity appreciation and cash flow over time.

7. Tax-Free Cash Flow

By leveraging your capital and capitalizing on depreciation and mortgage interest deductions, your cash flow from the rental property can potentially be tax-free. Consulting with a certified tax professional is advisable to explore strategies for minimizing taxes on your cash flow and deferring taxes on capital gains, particularly if you plan to sell your property in the future utilizing a 1031 Exchange.

8. Vacation Property

You have the option to utilize your income property as a vacation destination and rent it out when you’re not using it. This essentially provides you with a free vacation home, as the rental income can offset your expenses when you’re not occupying the property.

 

Rental Demand for Single-Family Homes is Increasing

There’s a noticeable resurgence in the rental market. With increasing demand and limited supply, landlords have the opportunity to raise rental rates in line with regional increases. Here are some statistics and reasons behind this trend:

 

  • As of early 2013, over 43 million Americans were renters, and it’s projected that the number of renter households will increase by between 4.0 million and 4.7 million in 2014.
  • The number of single-family homes expected to be rented across the U.S. by 2015 is over 40 million, marking a significant 185% increase from the approximately 14 million rented in 2013.
  • Despite rent increases in today’s rental market, 40% of people choose to rent and continue renting because they enjoy the lifestyle.
  • There has been a notable surge in buy-to-rent purchases, particularly among homeowners who own more than one property.
  • Home prices are expected to rise half as much in 2014 due to an increase in supply coming onto the market. Tight credit conditions are expected to persist due to ongoing unemployment or underemployment, further driving demand for rental units and replenishing the rental market.