With the market favoring selling so thoroughly, you might consider selling one or more of your investment properties. After all, it seems like a prime opportunity! But before you prepare that listing, wait. There are compelling reasons to hold your properties for the long haul – even when conditions make selling an attractive prospect.
Holding a single-family rental (SFR) real estate investment offers a plethora of advantages for investors. While individual circumstances can vary, here are just a few of the vast benefits of holding onto your SFRs.
10 Reasons Why Investors Choose to Buy and Hold Their SFR Investments
1. Steady Rental Income
Holding a rental property provides a consistent and predictable stream of rental income. This income helps cover the property’s expenses, including mortgage payments, property taxes, insurance, and maintenance costs. Investors who hold long-term see their equity grow without having to pay off the mortgage with their own money!
Over time, real estate properties generally appreciate in value. This means your equity – and net worth – grows. Remember, real estate will always have value, if only because of the land it sits on. Unlike publicly traded stocks, the value of your SFR investment isn’t solely determined by market sentiment. You can improve the home’s value through diligent maintenance and property improvements.
Real estate investing often involves using leverage, meaning you can purchase a property with a relatively small portion of your own money and finance the rest with a mortgage. This leverage allows you to control larger assets with less capital upfront. As we mentioned above, this leverage combined with cash flow means a relatively small portion of your money goes into the investment – for a much more valuable property! And it only grows more valuable over time.
4. Tax Benefits
Rental properties come with various tax benefits, including deductions for mortgage interest, property taxes, insurance, and maintenance expenses. It’s a huge reason people utilize this strategy to begin with. Additionally, depreciation can provide a non-cash deduction that can offset rental income. Uncle Sam tends to favor long-term investments over short-term ones.
5. Inflation Buffers
Real estate investments, including SFR properties, hedge against inflation. As the cost of living increases, rental income and property values tend to rise, helping to preserve your purchasing power. While more liquid assets can be beneficial, inflation often diminishes their value. Putting your money in real estate helps protect and grow wealth no matter what the economy does.
Real estate adds diversification to your investment portfolio. It often behaves differently from traditional stocks and bonds, providing protection against market volatility. The more properties you own, the greater your diversification, cash flow, and risk mitigation.
7. Greater Control
As a property owner, you have control over critical decisions related to the property, such as rental rates, property management, and potential improvements. This level of control allows you to influence the property’s performance. This isn’t the case with other real estate investment strategies like REIT investing or crowdfunding.
8. Multiple Exit Strategies
Holding an SFR property provides flexibility in terms of exit strategies. You can sell, refinance, or pass it on to heirs. Buy-and-hold real estate is less liquid, but it doesn’t demand a quick exit, either. You have options.
9. Legacy and Estate Planning
Real estate investments can be passed on to heirs as part of your estate planning. This can provide financial security for your loved ones and potentially offer tax advantages. For example, certain estate planning strategies help your heirs avoid capital gains taxes you would pay if you sold the property. Remember, most investors start out to secure generational wealth first and foremost.
10. Stability and Predictability
Rental income from SFR properties tends to be more stable and predictable than other types of investments. People will always need housing; a well-located property can maintain consistent demand. Real estate is one of the most reliable investments you can make. This is only more true of residential properties!
Sometimes, selling a property is the right move. We would warn against making this move solely because the market favors sellers. Weigh your options with your portfolio advisor to determine your best avenue for securing lasting wealth. Selling may empower you to grow your portfolio to new heights – or it may give you a temporary cash infusion when you could benefit more from a steady income stream.
Our residents stay an average of seven years in an REI Nation property.
How long might you benefit from investing in an SFR?