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Should I Become a Landlord or Sell?

Today’s topic is a question that often plagues homeowners: “Should I keep my house as a rental property or sell it?” It’s a decision that demands careful consideration, where taxes, goals, appreciation, and cash flow all come into play.

Let’s face it, selling your property can offer immediate benefits. You can use the funds for a down payment on your next home or invest the money elsewhere. Not to mention, selling means freeing yourself from the burdens of being a landlord—no more maintenance, repairs, or searching for tenants.

Imagine this scenario: you bought a property for $400,000 and now have the opportunity to sell it for $500,000. That’s a whopping $100,000 profit. Even after accounting for real estate agent fees and closing costs, you still stand to make a substantial amount. And the icing on the cake? If you’ve lived there for at least two of the past five years, the profit is tax-free.

But let me tell you, if you have the financial means, holding onto your property as a rental could be a game-changer for your future. Remember, since you’ve owned it for more than two years, any appreciation in its value won’t be subject to capital gains tax. Plus, rental income has the power to propel your wealth-building journey, thanks to monthly cash flow and potential principal pay down by tenants.

To give you an idea, let’s say your rental property brings in a cool $3,000 in monthly rent – that’s $36,000 per year. With mortgage payments clocking in at around $2,000, you’re left with a sweet $12,000 in annual profit. And here’s the kicker: as the rent increases over time and the mortgage balance dwindles, your profits will continue to soar. Don’t forget the cherry on top – the property’s long-term appreciation could be a major bonus, especially if you’re willing to handle landlord responsibilities or hire a property manager to handle them for you.

Of course, we must consider the potential risks associated with keeping your property as a rental – bad tenants, unforeseen expenses, or a housing market downturn. But if you’re willing to navigate these challenges, the rewards can be well worth it in the end.

In conclusion, the decision to keep your property as a rental or sell it isn’t a simple calculation. It’s a multifaceted choice that requires evaluation of your financial goals, future plans, and risk tolerance. If you find yourself grappling with this decision and need guidance, don’t hesitate to reach out to us. We’re here to help you with all your real estate investing needs, ensuring your path to success is paved with informed choices.

Please let us know if you’d like to review the options and go through calculations for equity appreciation, cash flow, and tax savings.

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