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I’ve encountered the question “Should I buy or hold?” on several websites for several years. All I have seen are opinions such as “only hold a property for X years.” Here, I propose a simple process for deciding whether to sell or hold.
First, what should you base your decision on? That’s simple: your investment goal.
Financial Freedom
The goal of real estate investing is financial freedom. However, this requires more than just replacing your current income. Financial freedom requires an income that enables you to maintain your current standard of living for the rest of your life. To maintain your standard of living, you need an income that outpaces inflation.
Each trip to the store costs you more for the same basket of goods. If your rental income doesn’t outpace inflation, you won’t have the extra money to purchase the same items.
This means the decision to sell or hold depends on how the property has performed in the past. I created the following decision tree to simplify the process.
The Bottom Line
Evaluate the property based on whether it will enable you to achieve financial freedom. If rent increases have not outpaced inflation, you know what to do.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
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