Should You Keep That Rental Property?

By Brett Gottlieb

Any investment will always involve both time and money, and this is especially true for rental property owners. Think about all the factors that go into owning a rental property: buildings must be maintained, grounds must be monitored, fixtures and plumbing must be repaired, and insurance and taxes must be paid. The financial benefits of your rental property need to outweigh the effort you put into it in order to make the whole experience worth it.

If you are debating whether or not to keep your rental property, before making any decisions, ask yourself the following questions.

How Reliable Are Your Renters?

How your rental property is treated and maintained over time will determine how much work and maintenance expenses need to go into it. This is largely determined by the people who occupy your home day in and day out. If your renters are prone to cleaning up after themselves and keeping your rental property well-kept, then the amount of property maintenance will be kept at a minimum. However, if you have renters who do not clean up after themselves or are at risk of causing major damage, then that will cost you a lot of time and money.

Look back at your last several renters and see if you can detect any patterns. Do you tend to attract reliable renters and the amount of work and maintenance for you has been a breeze? Or are you prone to finding renters who turn out to be disappointing in the end, and your wallet is proof of it?

What Is Your Real Return On Investment (ROI)?

Just because your renters cut you a check every month does not mean that every dollar you get goes straight into your bank account. There are expenses that come with property ownership, and it’s important to take them all into account so you can figure out what is your true ROI. Take your monthly rental income and subtract any maintenance or repair expenses, management company fees, and anything else that was spent on your property that month. The result is your true ROI for the month. Repeat this for the last 6 months to get an estimated monthly average. Once you have these numbers, you can determine whether or not you are making money, and if that amount is satisfactory for the amount of responsibility and time you put into it.

Do The Tax Benefits Still Make Sense?

As a rental property owner, you have access to a set of unique tax benefits provided by the Internal Revenue Service (IRS). For instance, you have the opportunity to deduct your mortgage interest rate payments, your property tax insurance, advertising expenses to recruit tenants, and repair and maintenance expenses. There is even a special category called “depreciation” where rental property owners can deduct the estimated annual “wear and tear” of their property.[1] In order to determine whether or not you should keep your rental property, calculate how much you save on taxes in addition to your monthly rental income after expenses. For instance, if you are in a higher tax bracket, then your rental property has the power to lower how much you’ll pay in taxes. However, if you cannot utilize many of the tax benefits and the numbers do not add up, then keeping your rental property may not make sense financially.

[1] https://fitsmallbusiness.com/rental-property-tax-benefits-deductions/

Is It Worth It?

Your time and money are precious resources that should always be put to good use. If you find that your rental property is giving you a desired boost in income without impeding on your well-being, then you should definitely consider keeping the property. However, if your property isn’t yielding the results you would like and it’s causing you headaches, then it may be time to consider other options.

Remember that you don’t need to make this decision on your own. To help you feel secure in your choice, we at Comprehensive Advisor would be more than happy to walk you through the different financial options regarding your rental property. Email us at info@ComprehensiveAdvisor.com or call (760) 813-2125 to request your complimentary consultation.

About Our Advisors

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees in Business Administration and Economics. Brett is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.

With a combined experience of over three decades in the financial services industry, our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial solutions for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a retirement road map to help ensure their assets are protected and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Comprehensive Advisor are not affiliated companies. C.A. Financial & Insurance Services, CA Ins. Lic. #6000262. This material is intended to provide general information and is believed to be reliable, but accuracy and completeness cannot be guaranteed. Neither the firm nor its representatives may give tax or legal advice. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc. generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. 665890

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