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Ask Dave

Keep Or Sell Paid-For Rental

Dave gives Lawrence some stipulations about keeping a rental property, rather than selling it to invest in a mutual fund.

QUESTION: Lawrence has a paid-for rental house.  Should he keep it or sell it and put the profit in a good growth stock mutual fund?

If you manage the property well and it’s in a good neighborhood, you can get a good return on a rental property investment.  It will appreciate in value.  If you have good tenants in the house, charge them the market rate, and maintain the property, your net cash-on-cash return plus the tax write-off and the capital gain will total more than you would make on a good growth stock mutual fund. 

In other words, a rental property managed well will give you a better rate of return than a mutual fund.

However, there is a hassle factor.  You don’t have to hassle with mutual funds.  As long as you don’t mind managing the property and it’s going up in value, then you should hang onto the property.