But one of the most commonly asked questions real estate investors have is, how long should you hold an investment property?
How Long Should You Keep an Investment Property?
The search and purchase of an investment property is a long one. It can take months or even years before you settle on a rental property that meets your financial goals. So, how long should you hold onto your investment property once you’ve found it? We recommend keeping your investment property for at least five to ten years. This time period gives your investment enough time to appreciate, go through market cycles, and qualify for tax benefits when you do decide to sell it.How Your Investment Property Makes Money
There are two ways a residential rental property will make an investor money.- Rental Income
- Property Appreciation
Benefits of Holding an Investment Property for 5 to 10 Years
Now, you may be wondering why this magic time frame for holding an investment property is between five and ten years. It’s because you’ll have the opportunity to experience these lucrative benefits.Hedge Against Inflation
If you’ve gone to the grocery store lately, you’ve likely noticed that inflation has a tight grip on our economy. In fact, from July 2023 to July 2024, inflation was 2.9%. Now, let’s not forget that challenging period in June 2022, when inflation reached 9.1%. One way to fight inflation and come out on top is by investing in rental property. Even as prices rise over the years, your real estate investment will likely keep up with that inflation. So, you’ll get your money’s worth when it comes time to sell it in the present economy!Property Appreciation
Holding onto your real estate investment for five to ten years allows the property to appreciate and to go through market cycles where you may see dips and increases in value. Generally, real estate will appreciate between 3% and 6% annually, with a national average of 4.8%. For some context, if you purchase a property for $100,000 and hold it for ten years, it could amount to around $160,000 with appreciation. And that’s without any renovation! Let’s take a look at the real estate market in Coolidge, Arizona. From 2017, the average home cost $112,000. In 2024, the average cost is $289,000. That’s more than doubled in less than ten years.Gain More Equity
If you purchased the investment property with financing, the longer you hold onto it, the more equity you will build by paying down the mortgage. Why is this good news for investors?
It means you can borrow against the property for additional investment ventures. It also means you keep more profit when you sell the property.
