In this post we outline several reasons why you should never sell your rental unit.
Mortgage Pay Down and Origination Costs. Most rental owners obtained a mortgage in the past to fund the purchase of the property. These mortgages, commonly 30 years long, cost several thousand dollars to obtain. The amount of your mortgage payment that goes towards principal increases each year you pay down a mortgage. The later years of a mortgage are when principal repayment and the subsequent return on investment really start to kick in.
Capital Gain and Depreciation Recapture Tax. While you can avoid paying both of these taxes upon sale, using a properly executed IRS 1031 exchange, it is simply easier to keep your existing unit and existing gain. If you really need the cash available due to appreciation, we would recommend completing a refinance.
Known Issues or Perfection. This is the “devil you know vs. the devil you don’t” issue. You know your property well. You have either fixed all it’s issues or you know fairly well what it needs. Exchanging your known property for one that you don’t know brings with it the risk of facing unknown/undiscovered issues with the new property.
Ride the Inflation. Because real estate is tied so closely to the skilled trades and materials inflation rate, the long term inflation potential in the right cities cannot be beat.
Managers Can Take Care of the Property on Your Behalf. Hiring the right property manager will literally allow you to forget you even own the property.
Selling Costs. 6% to the agents, 2% to the title company, many thousands in carrying costs, and many many more thousands in pre-sale repairs. Before you know it, you are giving up 15-20% of your sales price to these things. Why not keep the property, refinance, and buy another unit.
If you are looking for a property management team that has several decades of experience dealing with nothing but property management including the issues described above, do not hesitate to reach out to RL Property Management Group. Contact Us Here.
RL Property Management Group, the only property management company in Columbus started and run by engineers. Our clients enjoy a premium property management experience without paying a premium price. RL Property Management is designed to provide our clients reliability and performance.