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Buying Rental Property: Top Reasons to Hold Onto It

Buying Rental Property: Top Reasons to Hold Onto It

A sizeable portion of the U.S. population rents their homes in the form of apartments or even single-family homes. That probably helps explain why there are around 20 million rental properties in the U.S. with a little over 48 million total units between them. 

Of course, people's reasons for buying rental property vary. For some, it's a full-time business driven by an aggressive growth mindset. For others, it's a side hustle where they invest a bit of extra cash.

If you own rental property, though, keep reading for some key reasons to adopt a buy and hold strategy.

Rental Income

One key reason for hanging onto a rental property is that it provides recurring income on a monthly basis. That kind of income will often weather economic changes. Even if the economy takes a turn for the worse, people still need places to live.

Depending on the property type and the quality of tenants, it can become a sufficient cash flow to allow you to make additional investments. You can even turn your rental property into a largely passive income stream by using a property management service to handle day-to-day management.

Tax Benefits

Owning a rental property can also confer a number of tax benefits. For example, you can often deduct operating expenses, such as:

  • Property management fees
  • Repairs
  • Maintenance
  • Mortgage interest
  • Insurance

When you add all of that up, it can put a serious dent in the amount of taxes you owe for a given year.

You can also see tax benefits in other ways. If you need continuing education or a home office for your rental property business, you can often deduct some of those expenses.

If you qualify, you may see an exemption from Social Security and Medicare taxes on the income the property generates.

Property Appreciation

One of the biggest reasons that real estate investors hang on to rental properties is that property typically appreciates in value over time. Granted, factors beyond your control can undermine this tendency.

If the neighborhood around your rental property takes a turn for the worse, for example, that can drive down property values. If a major employer leaves an area, that can also have a serious negative effect on the value of your property.

As a general rule, though, if you buy a property and hang on to it for a while, you'll find an opportunity to sell it for more than you spent on it.

Buying Rental Property and You

Investment opportunities come in all kinds of shapes and sizes, but buying rental property is often one of the safer bets. It's a reliable source of recurring income, assuming it's a well-managed rental property.

It's also an investment that's resistant to large-scale economic changes. Regardless of how the economy looks, people need homes. Beyond that, real estate typically grows in value over time barring some dramatic change to the neighborhood or the local economy.

Kerr Properties, Inc. offers property management services in the Portland, OR area. For more questions or more information, contact Kerr Properties, Inc. Today.