Owning rental property is a great way of generating passive income. According to a recent report, the monthly asking price for rental properties in Canada has been on the increase in 2022. At times, however, holding onto an investment property for too long might not be a very good idea.
Here are some signs it might be time to part ways with your rental home:
The property is depreciating or appreciating
Some people assume that the value of real estate automatically appreciates with time. While this is true in many cases, there are some exceptions. Your property could depreciate due to low demand for real estate, poor job growth, abandoned homes in the neighborhood and nearby waste sites. If you realize that your rental home is going down in value, you might want to get rid of it before the value drops even lower.
On the other hand, if your investment property has appreciated significantly, consider selling. You might make a higher profit from selling than from renting.
The housing market is not very profitable
Your neighborhood might begin experiencing lower demand for rental property due to oversupply or low population growth. Due to the decreased demand, landlords might be forced to reduce their rental rates. When this happens, you could find it difficult to cover taxes, mortgage, and maintenance costs. If the situation seems to be going from bad to worse, sell before it's too late.
Property taxes are very high
If rental property taxes in your area are too high, you could lower them by deducting expenses like insurance premiums, advertising, professional fees, utilities, and maintenance costs. If you do all this but still cannot reduce your taxes, then it might be a good idea to drop the property and move to a different market with better tax breaks.
The home requires a lot of repairs
Every home requires some maintenance occasionally. If you realize the cost of maintenance is beyond your financial capacity, it's time to sell. Think about the unexpected and expected maintenance costs to decide whether to hold onto your rental home or sell.
Life has happened
You might experience a divorce, death in the family or an illness that make it hard to focus on managing your rental properties. When the unexpected happens in life, you might want to consider selling your investment property.
The decision of whether to sell your rental home is never easy. If you need expert help making the right choice, get in touch with Regalway Homes.