Buy low, sell high – this single mantra has been a constant in the lives of millions of stock market investors. Knowing when to offload your resources – whether it be stocks or rental property – can mean the difference between short-term financial gain or a major long-term income stream. While it may look attractive to sell immediately with skyrocketing real estate prices in Toronto and the GTA, there are plenty of reasons to hold onto your Toronto rental property.
What do you stand to gain or lose?
Selling your rental property at the wrong time can be disastrous for property owners – it can shake up your personal finances, prolong your eventual retirement, and discourage you from future property-owning endeavours. By examining the potential benefits and drawbacks of impulsive selling, you may save yourself the grief involved with cashing in on what is ultimately a short-term gain.
Some things to keep in mind when deciding on whether or not to keep your rental property are whether or not you want to keep drawing long-term rental income, how long the real estate market spike may last, when the next spike may be, and how much your property will be worth during a future market boom. With these things in mind, you’ll be far better prepared to make a major decision regarding your property.
Examine the trends
Housing markets, much like stock markets, have high and low periods, with booms and busts. The major difference between the housing market and stock market is that booms and busts are not as catastrophic in nature as they are in the stock market. A property’s value will not increase or decrease in the same seesaw fashion that the stock market does – this is what makes real estate attractive as a long-term investment. Property will always hold decent value in the long term, where a stock may not.
Many investors can see these trends coming by examining what has happened previously – the cyclical nature of these markets are sometimes the best way to anticipate what is to come. If the boom appears to be a spontaneous and temporary one and you are in need of immediate capital, then it may be in your best interests to offload. If the boom occurs on a cyclical basis, then it may be wise to hold onto your property until the time is right. If you examine the trends, you will see that real estate always gains value in the long term, even if there is a short-term downward tick in the housing market.
The one correlation between the two markets that is true is that the longer you hold onto any investment – real estate or stocks – the more money it will make you.
Think long-term with real estate investments
With retirement being the end goal for most people, it’s important to plan for the long-term. Holding onto a rental property can provide owners with a source of regular, consistent income that complements their annual income from a salary or self-employment. This can make saving for retirement far faster (and easier) than doing it without the supplementary income.
Appreciation of your property is another factor to consider when thinking long-term in regards to your rental property. While selling immediately in a hot market may give you a much needed cash injection, your property may yield a far higher price in a future real estate market boom. Playing the waiting game with your rental property is often the wise thing to do, especially if you have long-term financial goals in mind.
Playing the real estate market like the stock market can yield impressive results for many property owners, but the pros and cons need to be considered in any situation. Acting too quickly can rob you of regular supplementary rental income, leaving you with a single source of income. Your property also may very well appreciate in value, allowing you to sell in a future boom for a far greater return. By understanding the risks and rewards, examining market trends, and planning long-term, you will be able to make the most out of your rental property.