I recently sat down with my CPA for our mid year correction meeting. We try to do this every year to make sure my withholding is correct and to discuss tax stuff. I know, sounds like fun right? Well, this year, while discussing my rental property, he says, you need to sell your rental. What? Just a year ago he advised me to never sell. What changed?
Well, that's a good question. What did change? He believes that in my case, the risk of owning this property is greater than the return. Side note; the property is paid for, no mortgage. But he believes that the 8-9% return on this property is not high enough to justify increasing taxes and expenses on the property. Hence, sell.
Wow, Once I got over being indignant about the whole episode, I sat down to think it through. While I really enjoy owning this property that I purchased for my daughter to live in while she was in college, it may have outlived its usefulness. Taxes on the property are up 22% in the past 2 years. The property is getting to the point where AC and water heaters will need to be replaced. And in the next several years the community anticipates an assessment. It may be time to bail.
There are several lessons to be learned here. 1) Things change. 2) You should have a great CPA watching out for you. 3) Know when to fold'em.
Investments in Real Estate can be a fluid situation. It pays to monitor them and know when to sell.
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