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Should You Keep That Rental Property?

By Jake Withnell, CFP®

Any investment will always involve both time and money, and this is especially true for rental property owners. Think about all the factors that go into owning a rental property: buildings must be maintained, grounds must be monitored, fixtures and plumbing must be repaired, and insurance and taxes must be paid. As with any investment, you want the financial benefits of your rental property to outweigh the effort you put into it so that it stays a profitable piece of your financial strategy. 

If you are debating whether or not to keep your rental property, before making any decisions, ask yourself the following questions.

How Reliable Are Your Renters?

How your rental property is treated and maintained over time will determine how much work and maintenance expenses need to go into it. This is largely determined by the people who occupy your home day in and day out. If your renters are prone to cleaning up after themselves and keeping your rental property well-kept, then the amount of property maintenance will be kept at a minimum. However, if you have renters who do not clean up after themselves or are at risk of causing major damage, that will cost you a lot of time and money. 

Look back at your last several renters and see if you can detect any patterns. Do you tend to attract reliable renters and the amount of work and maintenance for you has been a breeze? Or are you prone to finding renters who turn out to be disappointing in the end, and your wallet is proof of it? 

What Is Your Real Return on Investment (ROI)?

Just because your renters cut you a check every month does not mean every dollar you get goes straight into your bank account. There are expenses that come with property ownership, and it’s important to take them all into account so you can figure out your true ROI. Take your monthly rental income and subtract any maintenance or repair expenses, management company fees, and anything else that was spent on your property that month. The result is your true ROI for the month. Repeat this for the last 6 months to get an estimated monthly average. Once you have these numbers, you can determine whether or not you are making money on the property, and if that amount is satisfactory for the amount of responsibility and time you put into it. 

Do the Tax Benefits Still Make Sense?  

As a rental property owner, you have access to a set of unique tax benefits provided by the Internal Revenue Service (IRS). For instance, you have the opportunity to deduct your mortgage interest rate payments, your property tax insurance, advertising expenses to recruit tenants, and repair and maintenance expenses. There is even a special category called “depreciation” where rental property owners can deduct the estimated annual “wear and tear” of their property. (1) In order to determine whether or not you should keep your rental property, calculate how much you save on taxes in addition to your monthly rental income after expenses. For instance, since you are in a higher tax bracket, then your rental property has the power to lower how much you’ll pay in taxes. However, if you cannot utilize many of the tax benefits and the numbers do not add up, then keeping your rental property may not make sense financially. 

Is it Worth It? 

Your time and money are precious resources that should always be put to good use. If you find that your rental property is giving you financial growth without causing headaches, then you might consider keeping the property. However, if your property isn’t yielding the results you would like and it’s becoming a burden, then it may be time to consider other options.

Remember that you don’t need to make this decision on your own. To help you feel secure in your choice, we at JGP Wealth Management would be more than happy to walk you through the different financial options regarding your rental property. Reach out to me at 503-446-6450, email jwithnell@jgpwealth.com, or schedule an introductory phone call online.

About Jake

Jake Withnell is a financial advisor at JGP Wealth Management, an independent, fee-based financial advisory firm in Portland, Oregon. Jake is known for going the extra mile for his clients and for his passion for working tirelessly to help his clients find solutions to their financial concerns so they can confidently live out the life they want. He prioritizes listening and understanding as the foundation of his relationships with his clients, and his highest hope is that they can spend more of their time and energy on their passions knowing he is watching over their financial future. Jake specializes in serving business owners, Nike executives, and retirees, and plays a key role in JGP’s portfolio management process, building and analyzing financial models, and conducting client cash flow analyses. 

Jake graduated from Eastern Washington University with a bachelor’s degree in professional accounting and finance. He is a Certified Public Accountant (CPA) and a CERTIFIED FINANCIAL PLANNER™ professional. Jake’s claim to fame is his time playing tight end for the Eastern Washington University Eagles, all while earning four-time Big Sky Conference First Team All-Academic honors! Jake values giving back to his community and does this by volunteering with the Children’s Cancer Association, Family Building Blocks, and New Avenues for Youth. In his free time, Jake takes advantage of the many outdoor activities the Northwest has to offer, such as trail running, mountain biking, and hiking. He loves traveling and spending long weekends at his family beach house in Seaside, OR. To learn more about Jake, connect with him on LinkedIn. You can also watch his latest webinar on 6 Ways to Maximize Your Nike Employee Benefits


(1) https://www.stessa.com/blog/tax-benefits-of-owning-rental-property/#:~:text=Main%20tax%20benefits%20of%20owning,investor's%20federal%20income%20tax%20bracket.