Real estate is a renowned sector for its stability, and many investors flock to it as a means of securing passive income. However, with the coronavirus, the subsequent lockdowns in 2020, and the eviction moratorium of 2021, there’s a lot of anxiety regarding 2022. Understandably, landlords have many questions about what the future holds for the real estate market, seeing as the ripple effects of the pandemic are still very much present.
If you’re an entrepreneur wondering if you should stay or ditch while you still have the chance, then read until the end of this post. This article takes a hard look at today’s rental market to help you decide if landlords should sell their rental in 2022?
Before we go on, it’s essential to point out that the market differs from one place to the next. Therefore, it would be in your best interest to discuss your local rental market with a neighborhood expert. That said, here’s the general outlook for 2022:
High demand for homes
The moratorium preventing landlords from removing defective tenants drew to a close in late 2021, opening the floodgates for eviction notices. More people are now facing the prospect of being homeless, with many more pending evictions set to spill over into the new year. As a result, there’s an increase in demand for cheap housing.
Additionally, another thing contributing to this trend is the rise in more financially secure millennials. These adults now seek to own homes in the suburbs thanks to the significant migration to remote or hybrid jobs.
Rise in home prices
The market prediction for home prices is a bit shakier than the rest. Although this isn’t unconventional as prices tend to have a mind of their own once people think it’s going in one direction, and the post-pandemic uncertainty adds fire to the flame. Despite the confusion, we can safely guess that home prices will rise. Going by the rising demand in housing and the fact construction and supply have a long way to catch up, this scenario is most likely to take precedent in 2022.
Increase in mortgage rates
Despite 2021 reporting some of the lowest record marking mortgage rates in history, it’s unlikely that 2022 will continue in that line. This housing subsidy received a tremendous push from the Federal Reserve, but since they’ve given us the heads-up that they plan to pull back this year, we can expect mortgage rates to rise alongside it.
Now that we’ve established the current market outlook, we can finally get into what this means for landlords looking to sell their rentals.
Benefits of Selling Your Rental
You have cash-in-hand
Whether you choose to sell today or next year, one of the most obvious benefits of selling a house is cash-in-hand. Houses are a substantial asset, so you can generate a significant amount of money by selling your rental. You can then funnel that cash into other investment options or cover other financial responsibilities.
You eliminate the stress of being a landlord
Being a landlord is hard work, and it’s simply not for everyone. If you recently realized that having tenants is more stressful than it’s worth, then there’s no shame in throwing in the towel. After all, to run a profitable rental business, you need to put in some effort to market vacancies, screen applicants, perform inspections and routine maintenance, collect rent, and monitor your expenses. Even if you don’t plan to sell all your rentals, you could significantly reduce your stress levels by eliminating one or two units.
Drawbacks of Selling Your Rental
You could sell at a loss
Although today’s market is firmly in the seller’s territory, the property could still sell at a loss thanks to supply outpacing demand. How, you might be wondering? As we highlighted earlier, the realities of your local market could differ from the consensus. So if you live in an area where a buyer’s market is prevalent, you’re already at a disadvantage.
Moreso, unexpected costs could burrow into your profits. For instance, if you need to perform significant repairs to make your houses more marketable, you could be on the losing end after capital gains deductions.
You narrow your portfolio
Finally, you remove an asset from your portfolio when you decide to sell your rentals and effectively quit real estate. Despite all the curveballs the real estate industry has recently seen, investors with the right strategy have still managed to pull a profit. If you’re selling your rentals because you’ve been unable to adapt your business model, then you also lose the opportunity to learn from your mistakes and get your property working for you.
So there you have it! We hope this article helped shed some light on current market trends, as well as the pros and cons of selling your rental now. Although all signs point to the year being a great year for real estate, there’s still no answer that fits all when asking should landlords sell their rentals in 2022. Every property owner’s local market and circumstances differ, so we wish you the best in your decision-making.
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