How long should buy and hold real estate investors hold onto their rental properties investments?
There are many debates over how long rental properties should be held as an investment. Some plan to hold onto their rental properties forever. Some recycle them depending on trends and cycles. Many that have sold call it their worst move ever. So what questions should buy and hold real estate investors be asking in order to get to the right answer?
There are many questions and factors to consider when it comes to determining the optimal time to sell. These include: property condition, functional lifespan, highest and best use of a property, local population shifts, competition and more. However, without a doubt, the most pressing factor in deciding how long to hold onto rental properties is where the market and in particular home values are going.
People have declared that the new housing boom is “different this time” and can’t go down. History tells us otherwise. In reality, history suggests that housing cycles will continue to turn predictably. So where will the market be in one year? How about two, five, and even ten years from now? Don’t think that because we have been in an upturn for so long the market won’t go down. This might have actually been the best time to consider selling you rental property investments
Data suggests the U.S. housing market will be on an upward trend for another 3 to 5 years. Assuming cycles keep turning, as they have, we’ve seen another down turn around then, followed by another significant upturn. Knowing this can help rental properties investors decide whether to ride out one or two cycles regardless of what happens. However, the right answer for individual investors really comes down to their goals and timelines
So what are your life, financial and timeline goals? Do you have kids going off to college that will require additional income and perhaps liquidity and an equity cushion at a specific time? Do you have kids that will be starting businesses and families and that you’ll want to help with buying homes? What about aging parents that may need financial help? Answer these questions before you decide
Aside from a few exceptions, this is the time to be selling rental properties and expanding portfolios . If there was ever a time to leverage, this is it. Bullishness by analysts, lenders, other investors and consumers will keep driving the market up and those that sell rental properties investments now will reap the maximum rewards. In most cases, investors will want to go even above and beyond the base investments they think they’ll need for income in order to account for the unexpected later. Look for good ways to leverage, acquire and time your exit.