Author Topic: I am tempted to sell my house  (Read 1087 times)

JLee

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I am tempted to sell my house
« on: January 18, 2018, 07:52:31 PM »
I have a house in Phoenix that I bought for $140k in early 2013.  I moved in 2015 and now have friends renting it for an aggregate of $1,120/mo.  My monthly cost is about $755/mo so I'm cash positive ~$365/mo (minus repairs/etc, of course).  My house has been impressively low-maintenance to date but things can/will come up eventually (I currently need a ~$2700 RV gate, or to fly out myself and build one to replace what's falling down now) and the housing market has also exploded.

It looks like I would be able to sell the house in the $220k ballpark (comps came in just north of $250k but I don't feel that is realistic), so if I factor 6% realtor commission and $6k in unanticipated / misc extra expenses, I would walk out with $200k on a mortgage balance of $118k.  Late Sept 2018 is when I'll drop out of the 2/5 residency requirement for capital gains, so I believe I'd be paying capital gains solely on the amount depreciated while it was a rental property (not entirely sure?)...but basically, I could probably cash out now and end up $80-90k better off (while losing a rental property).

I've not been overly interested in doing this because I have friends living there and I have stuff there (I moved cross-country via airline and left most of my stuff in my house), but it's getting to be enough money that I feel I'd be doing myself a disservice to not consider all options. 

What would you do?

waltworks

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Re: I am tempted to sell my house
« Reply #1 on: January 18, 2018, 08:21:54 PM »
I'd sell it while you have the capital gains exemption. Yeah, it's a bummer to boot your friends, but it's not $90k worth of a bummer. And if you have stuff you just left there... it's probably stuff you can just have your realtor sell off or donate if you don't want the hassle.

Get rid of it.

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JLee

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Re: I am tempted to sell my house
« Reply #2 on: January 18, 2018, 08:23:04 PM »
I'd sell it while you have the capital gains exemption. Yeah, it's a bummer to boot your friends, but it's not $90k worth of a bummer. And if you have stuff you just left there... it's probably stuff you can just have your realtor sell off or donate if you don't want the hassle.

Get rid of it.

-W

Oh yeah, there's nothing there that I'm all that attached to.  There'd be some massive Craigslisting and I'd move on with my life.

GrayGhost

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Re: I am tempted to sell my house
« Reply #3 on: January 18, 2018, 09:48:18 PM »
The math is fairly straightforward on this one... it's an easy decision to sell. You're barely making 4 grand a year, probably less once the expenses start to build up, and there's also the typical risks one encounters when landlording.

I'd sell, but try and contact your friends and see if they'll buy it off of you, you may be able to skinny down on some of the typical expenses/pains of selling if it works out.
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JLee

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Re: I am tempted to sell my house
« Reply #4 on: January 18, 2018, 09:52:07 PM »
The math is fairly straightforward on this one... it's an easy decision to sell. You're barely making 4 grand a year, probably less once the expenses start to build up, and there's also the typical risks one encounters when landlording.

I'd sell, but try and contact your friends and see if they'll buy it off of you, you may be able to skinny down on some of the typical expenses/pains of selling if it works out.

That's not a bad idea - I'm 99% confident that nobody living there has the financial means to buy it at market value, but it's certainly worth the inquiry.

I was initially planning on moving back into my house after a few years in NJ, but at this point I would want to buy/build something entirely different than what I bought...so I can't find any reasons to hold onto it.

sequoia

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Re: I am tempted to sell my house
« Reply #5 on: January 19, 2018, 05:39:05 AM »
I'd sell, but try and contact your friends and see if they'll buy it off of you, you may be able to skinny down on some of the typical expenses/pains of selling if it works out.

This. Tell your friend you will give him/her a good discount since you are saving on realtor fees. If not, I agree with selling the place. 
« Last Edit: January 23, 2018, 12:30:16 AM by sequoia »

Another Reader

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Re: I am tempted to sell my house
« Reply #6 on: January 19, 2018, 06:26:17 AM »
The housing market in Phoenix continues to go up.  Based on a long history of boom and bust there, this will end badly.  I sold two Tempe houses for top dollar after renovating them over the last two years and don't regret it.  I may sell one more and pay off two remaining mortgages with the proceeds.

To get a good price for your house, you will likely need to do paint and carpet, fix anything that isn't in perfect working order, and your roof and A/C will need to be in good shape.  You might have to take a vacation out there to get the house sale ready.

Your rent is also significantly below market.  You should be getting closer to $1,400.  Not the greatest return on current market value, but one percent of your purchase price.  Because you rented it to friends below market to have the house available when you wanted it and did not really buy it as a rental (the pool makes it less desirable to hold as a rental), I would consider selling.

PM me and we can talk comps.,,

JLee

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Re: I am tempted to sell my house
« Reply #7 on: January 22, 2018, 06:14:47 PM »
My preliminary tax numbers look like having rental income cost me $133 in AZ state taxes and about $1.4k in federal taxes, giving me around $160/mo in net income (minus maintenance/repair).
« Last Edit: January 22, 2018, 06:54:35 PM by JLee »

tralfamadorian

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Re: I am tempted to sell my house
« Reply #8 on: January 22, 2018, 06:54:57 PM »
My monthly cost is about $755/mo so I'm cash positive ~$365/mo (minus repairs/etc, of course).

My preliminary tax numbers look like having rental income cost me $133 in AZ state taxes and about $2k in federal taxes, giving me around $155/mo in net income (minus maintenance/repair).

Wait, what? The numbers are not adding up. You're deducting mortgage interest, repair and maintenance costs and depreciation from the rental income, right? 

JLee

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Re: I am tempted to sell my house
« Reply #9 on: January 22, 2018, 06:57:28 PM »
My monthly cost is about $755/mo so I'm cash positive ~$365/mo (minus repairs/etc, of course).

My preliminary tax numbers look like having rental income cost me $133 in AZ state taxes and about $2k in federal taxes, giving me around $155/mo in net income (minus maintenance/repair).

Wait, what? The numbers are not adding up. You're deducting mortgage interest, repair and maintenance costs and depreciation from the rental income, right?

Yep. It's all via Schedule E. If I add it in the "I live here" way, I have enough to itemize and then I see more of a benefit.

For AZ, I show a net rental income of $218 but once I added property depreciation, my AZ state tax bill went from $6 to $133.

It would be nice if I'm missing something..

JLee

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Re: I am tempted to sell my house
« Reply #10 on: January 22, 2018, 07:03:16 PM »
I think the tax calculation changed because of something else in my return. I just removed the rental property and my federal amount owed decreased by $50, resident state decreased by $51, and obviously AZ is then $0.  The tax difference is not nearly as big as I thought.

Rich on Money

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Re: I am tempted to sell my house
« Reply #11 on: January 25, 2018, 05:08:37 AM »
A lot of people will say they are cash flow positive and calculate this by subtracting their mortgage from their rent.  I wish it were that easy.

According to the 50% rule in real estate, approx 50% of your rent goes to expenses.  In your case, only $560 of your rent is profit, which means you have a negative cash flow every month.   Maybe your expenses are way better than the average, but my point is your cash flow isn't as good as you think it is.  This is a very common math error for real estate investors.  My advice is sell.

Linda_Norway

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Re: I am tempted to sell my house
« Reply #12 on: January 25, 2018, 05:47:19 AM »

... I have stuff there (I moved cross-country via airline and left most of my stuff in my house), but it's getting to be enough money that I feel I'd be doing myself a disservice to not consider all options. 


What is all this stuff? If you would sell it on Graig's list, wouldn't you be able to buy back something comparable at Graig's list at your new location?

Otherwise, look into container shipping. We moved to another country once on the cheapest way to move the furniture was to rent a sea container. Across the US you probably need something on wheels.

chasesfish

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Re: I am tempted to sell my house
« Reply #13 on: January 25, 2018, 06:08:30 AM »
Yeah, you should sell.  My rough estimate is you're making 4.8% on your $90,000 in a cash on cash return.  You can get 7% in a REIT if you want real estate exposure with zero effort.
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JLee

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Re: I am tempted to sell my house
« Reply #14 on: January 25, 2018, 06:12:30 PM »

... I have stuff there (I moved cross-country via airline and left most of my stuff in my house), but it's getting to be enough money that I feel I'd be doing myself a disservice to not consider all options. 


What is all this stuff? If you would sell it on Graig's list, wouldn't you be able to buy back something comparable at Graig's list at your new location?

Otherwise, look into container shipping. We moved to another country once on the cheapest way to move the furniture was to rent a sea container. Across the US you probably need something on wheels.

I moved over two years ago and rented my house furnished. The vast majority of what I left there is not something I need anymore, hence Craigslist.  Shipping is pointless because then I'd just have to store stuff here. : )