Owning a rental property without selling it can be a profitable, flexible investment strategy. You'll enjoy the benefits of long-term income instead of a single payout. You can also build equity in the property and take advantage of several tax breaks.
Being a house flipper who buys cheap properties to improve and sell them can be risky. You might end up trying to flip and landing flat on your face. Owning rental property makes sure you always have a safe place to land.
Is Denver a Good Place to Buy Rental Property?
The Denver real estate market is thriving, according to the most recent Apartment Association Rental Denver Vacancy and Rent Report. Rent rates may not be at their highest, but demand remains high. Vacancy rates recently decreased across all major areas.
The vacancy rate in Denver is around 6.1%. The measure of unoccupied units fell 0.6%, the largest drop seen since 2021.
The high demand and percentage of rented homes aren't the only positive aspects of the market. Denver also has a strong job market and offers a high quality of life to residents. It's the kind of area where an investor can go beyond an investment and start nurturing a community.
Is Owning a Rental Property a Good Investment?
The profitability of a rental property investment depends on several factors. What are the conditions of the real estate market? What are your goals, and what is your lifestyle like?
Keeping a property rather than selling it is worth considering. It allows you to experience the best of both worlds. You get the benefits of property ownership, such as building equity, and the rental income and tax breaks of a rental.
Continual Profit vs. One-Time Sale
Selling your property gives you a lump sum of cash. It can be useful in a pinch to pay off lingering debt.
Keeping the property to rent it out is a better long-term strategy. It gives you recurring income every month.
You can raise that rent every few months. Appreciation means that your property will be worth more if you decide to sell it later.
Equity and Legacy Building
Rental income can be used to repay your investment. Your renters are essentially helping you pay it back. Their rent can cover expenses such as:
- Mortgages
- Taxes
- Maintenance
More of the value of this money goes to you as the principal gets paid down.
You'll also be building equity in the property that you'd lose if you chose to sell it. That can give you more money if you do decide to sell later. It can also help with refinancing or additional investments.
You can even put that equity towards building a legacy. Use it to help your family with expenses such as:
- College
- Retirement
- Inheritence
Real Estate Tax Advantages
There are several real estate tax advantages you can take advantage of if you hold onto a rental property instead of selling it.
You can get tax deductions for:
- Mortgage interest
- Property taxes
- Insurance
- Repairs and maintenance
- Marketing
Property depreciation benefits can last up to 27.5 years. They can reduce your taxable income and save you thousands per year.
You'll also avoid capital gains tax penalties.
Flexibility
The best part of owning a rental property and waiting to sell it is the flexibility it provides. You always have the freedom to change your mind.
If you want to sell later, you can. Better market conditions will mean you get a higher sales price anyway.
You can also move into the property if your life circumstances change. What if you have an older loved one who needs to be close by? What if your family expands? You don't have to worry about where they'll go.
How Professional Management Makes Holding on to Rental Properties Even More Profitable
Professional property management makes sitting on a rental property more than an investment. It becomes a valuable passive income stream.
The managers can handle everything. They'll be in charge of tasks such as:
- Tenant screening
- Rent collection
- Maintenance
- Tenant communications
- Legal compliance
That gives you unprecedented freedom. You can live miles away and still take advantage of Denver's hot real estate market.
Frequently Asked Questions
What Raises Property Value the Most?
According to SpareFoot, homes are shrinking to an average of around 1,800 square feet. Increasing the size of a house is one of the best ways to improve its value. You can utilize existing areas, such as basements. You can also add features, such as an enclosed porch or a second story.
Certain home improvements are also likely to have a high return on investment and raise property value. They include kitchen or bathroom makeovers and energy-efficient appliances.
The key is always to use high-quality materials and professional installers.
What Decreases Property Value the Most?
Neglected maintenance will catch up with you. That includes everything from pest control to roof care. It can lead to structural issues, such as caving roofs or walls.
Excessive personalization can also be a problem. A home that you want to rent out or eventually sell shouldn't have too many personal items on display. You want the new residents to be able to see themselves in the space.
What Type of Rental Property is Most Profitable?
Multifamily properties tend to lead the pack in terms of profitability. These include:
- Duplexes
- Triplexes
- Small apartments
Short-term vacation rentals can also be profitable in the right location. Commercial properties, such as offices, can also be rented out to businesses.
Start with the three L's of real estate: location, location, location. You should also look at your potential tenants' demographics to determine which property type they prefer. Check market trends regularly because one type of property that's on top today can easily shift to the bottom tomorrow.
Work With My Haven Today
Owning a rental property can be a better investment strategy than selling. Getting regular rental income and building equity is better than a one-time payout. If you do decide to sell later, you're likely to get more.
My Haven has over 30 years of collective experience in property management. Our people-first philosophy leads us to treat everyone like family, including property owners, residents, and vendors. We'll ensure clear communication and collaboration. We'll use the latest technology for reliability and efficiency.
Contact us to find your property investment partner today.
