Should You Sell or Keep Collecting Rent: A Landlord's Dilemma
As a landlord in today's market, deciding whether to sell your property or continue leasing it out is a complex decision. Market conditions, tenant satisfaction, and local legislation all play a significant role in this decision. Let's explore the nuances involved in making this choice.
Evaluating Your Options
One common piece of advice for landlords is to keep your home but get work outside the home. While the idea of additional income is appealing, the current market conditions make it challenging. Homes are currently overpriced, and if you sell, you might not find a suitable replacement.
Rent prices are also experiencing inflation, which means incoming rent might not cover the costs of maintaining and operating the property. Additionally, evictions due to difficult tenants can be emotionally draining and financially burdensome.
Alternative to Selling: Taking a Loan
Instead of selling, one viable option is to take a loan. In many countries, there are tax benefits associated with owning rental property, and you can secure a tax-free loan using the property as collateral. This can help you maintain your investment without the need to sell. Your tenant continues to pay the monthly mortgage, and you can focus on your career elsewhere.
Challenges in Being a Landlord Today
Being a landlord in 2021 poses numerous challenges. Tenant screening and management have become more difficult, and it is difficult to find reliable tenants. Once you find a good tenant, they can quickly become problematic. This can be especially frustrating if you face non-payment or property damage. Deciding whether to keep the property or sell can depend on your current and future needs.
Property Value Considerations
When deciding whether to sell or keep the property, it's important to evaluate its value in light of several factors. If the property's value has increased enough to offset mortgage penalties, real estate commissions, and capital gains taxes, it might make sense to sell. On the other hand, if the property has been providing positive cash flow, and you have good tenants, it might be worth holding onto.
Current Legal and Economic Landscape
Local laws can heavily influence your decision. For instance, states like Oregon (OR) and California (CA) have recently enacted rent control measures. These laws can limit the ability to raise rent, which can reduce supply of rental properties and keep vacancies low. However, these laws often have exemptions, such as allowing rent increases by a small percentage plus inflation (CPI), which makes them less effective in practice.
Other states, such as Florida, might present a different opportunity for selling. For single-family homes (SFHs), the market could be more favorable. However, these decisions must also consider the current trend towards tenant rights, which can complicate a landlord's ability to evict problematic tenants. These new laws can be seen as a deterrent for potential smaller landlords but can also present challenges for maintaining the quality of your rental property.
As a landlord, it's important to strike a balance between providing family-friendly living conditions and enforcing tenant standards. Lawmakers' efforts to protect tenant rights can make it difficult to maintain the character of your rental property, especially if tenants engage in criminal activity or refuse to follow community guidelines.
Conclusion
The decision to sell or keep collecting rent is multifaceted and depends on various factors. Whether it's maintaining your investment, dealing with challenging tenant situations, or navigating complex local laws, weighing these factors will help you make an informed decision. Regardless of your choice, staying informed about market trends and legal requirements is crucial for successful rental property management.