Have you recently considered selling your investment property? If so, you’re hardly alone. This is a seller’s market, and a lot of your investor colleagues have cashed out. Over the last year and two, you’ve likely seen a lot of owners make some good money on their properties by selling for a lot more than their homes might actually be worth.
But, not so fast. When you decide to hold onto your investment during a seller’s market, you’re actually earning more than those fellow investors who are unloading whatever they can.
You are holding onto a rental property that’s likely in high demand. That property is gaining value, your tenants are paying down your mortgage, and rents are going up.
Instead of selling like everyone else, consider holding onto that investment. Here are some ways you can make the most of the properties you’re keeping in the current seller’s market.
Leverage Every Potential Rental Increase
Rents all over King Count and Snohomish County are going up, and you have a unique opportunity to make sure you’re charging a price that’s consistent with the rental market.
This includes rental increases when you’re negotiating lease agreements. Retaining good tenants is important, but with the market as squeezed as it is right now, your tenants are likely looking for good reasons to stay.
What we recommend is this: Raise the rent almost to the market average. Leave some wiggle room so your tenants can see that they’re getting a good deal. They know what it costs to move. They understand that rents are up elsewhere. Don’t be afraid to ask for more in monthly rent. Provide the comparative rental prices and the data you’ve gathered if they push back.
While we love that rents are rising in double digit percentages, we don’t want to put tenants into a situation where you’re asking them to pay more than they can afford. No one is re-qualifying their tenants at renewal time. Make a reasonable increase and you’ll still be earning more.
Consider Investing in Rental Property Improvements
Another way to earn more in rent? Improvements and updates.
Why would you do this now, when rents are going up anyway and maintenance is so expensive?
Because improvements, minor renovations, and even cosmetic updates will allow you to earn even more money. Your property will be the first choice among qualified tenants, and it will stand out on the rental market and earn you better income.
You’ll also increase your property value. When you do decide to sell years from now, you’ll have a more valuable property to take to the sales market.
Take All Your Tax Benefits
Your property value has likely increased with the market performing the way it has, and that’s going to mean that your taxes will likely go up too. You’ll also need to report the rent you earn on your federal income tax.
How can you limit your tax liability?
There are several ways to keep your taxes lower when you own rental property. You can deduct:
- Mortgage interest
- Professional service costs, like property management
- Property taxes
- Maintenance costs
You can also think about conducting a 1031 exchange if you want to sell one of your investment properties in this market but you don’t want to pay the capital gains taxes. Simply find another property, put the proceeds from the sale into that home, and defer those taxes.
We can help you leverage what you own in the market right now and in the future. For some reliable help in having a good investment experience, even in a seller’s market, contact us at Real Estate Gladiators. We work with investors in Monroe, Issaquah, Bellevue, Everett, Lake Stevens, Kirkland and other cities in and around King and Snohomish counties in Washington State.