Landlord Dilemma: Sell Or Hold in This Market

[Pesi S.]

Wanted to get some feedback from landlords if they are seeing the same effects in this weird market since Covid started and what are they doing.

On one hand the home prices have increased quite a bit. On the other hand the property taxes, insurance and especially the repair & maintenance costs due to tenants at home all day, shortages etc. due to Covid have also increased significantly and townships have also seized on this opportunity for raising property taxes. Rents have not kept pace with the proportion of the increase in expenses and prices. It's a dilemma as raising rents beyond a reasonable point (3%) for existing good and long time tenants creates risk of good tenants leaving and then you lose rent for a average of 1-2 months plus expenses in getting house ready, finding tenant, paying referral fees etc. which negates the increase in rent unless you are in the top A class properties.

Also when home prices come down which they most likely will at some point, these  expenses of property taxes, insurance and the maintenance costs will not come down. On one hand it seems like the best time to sell the property if you have made good gains. However selling involves close to 8-10% of price (commission, update house , closing, township transfer tax) and after that big taxes of capital gains and the depreciation recapture & other taxes which take a huge chunk out of the profit (at least 30-40%). 1031 exchange is also difficult in this type of market where you sell high and buy high if you can find something comparable.

Also after selling what does one do for investment. If you purchased something for $100K and sold for $150K and then later when market drops in future you purchase again for say $120K would it be really  worth it after going through all the expenses and effort of  buying and selling.

Seems like a tough dilemma for landlords unless you forget about ups and downs and hold forever. Also with the Govt having the stepped up basis where you could pass the property to your children without the tax burden in their sights for elimination of the tax benefit does this strategy also hold good ?

Thank you.