Buying vs Holding Rental Properties: Should You Sell for Higher Investment Returns or Maintain for Steady Income?
Aline, a Grenoble resident, has a rental studio that brings in 900 euros a month but is still unable to afford her primary residence outright. Now, she contemplates whether to sell this investment property to strengthen her personal funds for a mortgage or maintain it to boost her monthly income and showcase better financial capability.
In a radio program named Le Grand rendez-vous de l'immobilier, Aline posed her question to Nathalie Couzigou-Suhas, a Paris notary. Couzigou-Suhas suggests that Aline should keep the studio due to its substantial return on investment, but the final decision lies with the bank, as they consider the monthly repayment of the mortgage in relation to the borrower's income, not exceeding 35%. If Aline's salary is insufficient relative to her mortgage needs, the bank will require her to retain the studio and its consistent rental income.
Nathalie Couzigou-Suhas argued that given the studio's attractive rental yield, it would be unfortunate to sell it, as it would be sold at a discount compared to its market value. For property owners, buyers, sellers, or investors with legal, tax, or practical questions, it's recommended to join the Facebook group The Owner's Club. With around 14,000 members, participants share their experiences and provide insights to help others navigate the complexities of property ownership.
Financial advisors suggest that deciding between selling or retaining the investment property depends on several factors. Selling the property can offer benefits such as providing a substantial down payment, enhancing financial flexibility, and potentially reducing associated risks. However, keeping the property can generate ongoing rental income and demonstrate a stable income source to lenders. It's essential to weigh these factors and consult a financial advisor to determine the best strategy based on individual circumstances.
Aline, in light of the scholarship she's applying for and her interest in investing, could consider consulting a financial advisor to weigh the benefits of selling her rental studio versus retaining it for ongoing income. The decision to sell or hold might be influenced by factors such as the potential scholarship funds, the need for a down payment, and the financial stability the rental income provides, especially in relation to her mortgage application.
