When you purchased your rental property 1-3-5-20 years ago you in all likelihood made a terrific investment right? Maybe yes, maybe no.
When was the last time that you took the time to determine if your property is meeting your needs or not. Is your property located in an area that is desirable?, is it in a family friendly neighborhood?, are you attracting the kind of tenants that you want? Does it need repairs that you are avoiding? Could you sell your property easily in an emergency? Could you do something else with your money? How do you know if your property is still meeting your needs?
Let’s look at the benefits that Real Estate provides and you can be your own judge.
1.Cash Flow- Are you making enough cash flow to put up with the hassle?
2. Principal Reduction- Are the tenants helping you to reduce your debt or are you making the payments yourself because of vacancies? Have you determined why the vacancies are occurring? Is it due to your property not being in good repair?
3.Income tax savings – You have been deducting your expenses plus depreciating it one year at a time for up to 27.5 years for residential properties – which has sheltered the cash flow the property is making, plus your income from your job. How many years are left on your properties before you no longer can take advantage of the depreciation? That will mean less deductions. Did you pay cash for this property? Or if it is paid off that is another benefit (interest deduction) that you are not taking advantage of etc. (2 major benefits of RE not being utilized) is it time to sell?
4.Appreciation – You know that if owned desirable properties for a long time your property in all likelyhood is worth a heck of a lot more than when you purchased it originally right ?. Who has been the responsible party for helping you not only to reduce your debt but also with the equity and appreciation? That’s right the tenants.
What a great concept: You can own a business called "Real Estate" and have someone else help you make your payments to the bank. Over time I cannot think of another investment vehicle that can match Real Estate. Wonder why more people don't invest in RE.
We are in a once in a lifetime market and one can find one deal after another . There is no reason to wait for equity. You can buy at huge discounts each and every day sometimes at 30-60-70 % less than the property sold just a few years ago enjoying instant appreciation.
How did you score? So, are you going to continue to sit on the sidelines or take the next step?
If your property is no longer meeting your needs consider these 3 things:
1.Sell it- Remember capital gains plus paying back the credit you have been getting for your depreciation each year.
2.Refinance – Use proceeds to buy another property(s) – No capital gains
3.1031 Exchange- Perhaps the best option- You can move your equity on the property to another property and defer paying taxes.
So in conclusion, re-evaluate your property at least annually and pretend that you are buying it .If you say it is worth 60-80-120K would you buy it in its current condition ? Is the rent you are getting enough to justify keeping it or would it be better to sell?Would your rate of return on your investment be higher if you could buy a couple of properties with your profits? Probably yes.
Lot’s to think about. Feel free to contact anyone of us on the Omaha Real Estate Investing Team for a confidential consultation: Prudential Ambassador Realtors Fred Tichauer, 402-679-3914 or Shawn Prouse at 402-305-1504 or Keller Williams Greater Omaha Realtor John Van Gelder at 402-871-5596 and you will be happy that you did.
We consider ourselves to be one of the most experienced team in the Metro/Omaha area.With us you can count on: Excellence, Trust, Commitment, Honesty, Integrity, Leadership, Expertise, Practical Knowledge, Results and over 60 years experience as investors.
You can also check out our website for additional information. https://omaharealestateinvesting.com
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