Rent or Sell Case Study

[RXforFI]

Hello all,

I've recently joined the forum after working through the blog and really admire the mustachian philosophy.  As part of my efforts to optimize my life, I'm trying to take a top down approach and first tackle housing.  After considering my options, the thing that has most appealed to me is the idea of house hacking.  While researching multifamily properties, I was hoping to get some thoughts on whether my current townhouse is worth keeping as a rental or if I should just sell when the opportunity arises.  So here goes:

market value: 245K
original purchase price: 235K
original mortgage amount: 223,250
interest rate: 4.25%
mortgage term: 30 yrs
term remaining: 28 yrs
gross rent est: $1800/month
P&I: $1,100/month
taxes: $275/month
insurance: $38/month
HOA: 180/month
notes: roof is about 4 years old, HVAC is 8 years old, water heater is 2 years old

Thanks in advance for any insight!

[Papa bear]

Sell this.  You are losing money every month when you factor in amortization of large capital expenses.  Plus all your time and hassle. 

For a multi unit, you really need to be hitting the 1% rule.   

Unless you are lucky and you think there is an insane amount of appreciation. But that’s speculating.   So sell it. Buy a better rental with the proceeds.


Sent from my iPhone using Tapatalk

[Jon Bon]

So papa bear is right here. You would net $200 a month if nothing ever goes wrong and you managing yourself. So as a rental it is a steaming pile of dog poo.

However, it might not be that bad of a house to live in. Whats the deal there? Your talking about selling it but you just bought it (and paid transaction costs) and to sell now would be another round of transaction costs.

Looks like you put almost nothing down (which is fine), FHA or something like that? If you sell that house any equity you have is gone. So staying put might be your best bet for now.

[RXforFI]

Thank you for the replies!  I had a feeling as a rental it would not work but I guess I was trying to weigh keeping it to avoid the costs of selling (even with minimal cash flow as a rental) versus just selling and moving on.  As for why I was considering moving, I was hoping to find a way to really reduce my housing expense.  It seemed that if I could find a good deal on a multifamily to move into, I could potentially bring that expense way down and free up more cash for investing.  I qualified for a medical professional loan on my current place so I only had to put 5% down with no PMI.  I liked the idea of not tying up more cash in equity at the time so it seemed like a good option for me.