Author Topic: Rent or Sell Case Study - Minneapolis  (Read 640 times)

Frugal Vegan Mom

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Rent or Sell Case Study - Minneapolis
« on: April 03, 2019, 01:21:21 PM »
Super excited to be moving in with my fiancee this summer!  I've lived in my little house in a very popular neighborhood for 10 years.  Have never been a landlord, but I work part time and new house is only a few minutes away so wondering if it's a good financial decision to give it a try.  Also would love advice on what other aspects of our financial life should be considering when making this decision.   

Market Value: $180,000
Original Purchase price:  $114,000
Original Mortgage Amount: $91,200
Interest Rate:  5.125%
Mortgage Term:   30 yrs
Term remaining:   20 yrs
Amount remaining on mortgage: $68,000
Gross Rents: $1,400 / mo.
Principal and Interest (the P&I of your PITI - should match with the above info): $500 / mo.
Taxes and Insurance (the T&I of your PITI):  $245 / mo.
HOA costs:  $0
Deferred maintenance notes:  Windows are old and crappy but not sure when they'd NEED to be replaced.  Exterior of house needs to be repainted, but that would be done whether renting or selling. 

sammybiker

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Re: Rent or Sell Case Study - Minneapolis
« Reply #1 on: April 03, 2019, 01:45:46 PM »
Numbers look OK to me, especially if you're interested in trying out landlording and you think it may be something you'd like to continue.

If this will be your only rental and you're not looking to add more, I'd take a hard look at selling, taking your tax free gains and reinvesting elsewhere.  You may net $200-300/mo and I don't think that's worth the hassle.

Definitely agree with leaving the windows and I'd also leave the paint as-is unless it's absolutely awful/lead paint peeling issue.  You're unlikely to get your ROI on those when renting.

Papa bear

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Re: Rent or Sell Case Study - Minneapolis
« Reply #2 on: April 03, 2019, 01:53:51 PM »
Numbers look OK to me, especially if you're interested in trying out landlording and you think it may be something you'd like to continue.

If this will be your only rental and you're not looking to add more, I'd take a hard look at selling, taking your tax free gains and reinvesting elsewhere.  You may net $200-300/mo and I don't think that's worth the hassle.

Definitely agree with leaving the windows and I'd also leave the paint as-is unless it's absolutely awful/lead paint peeling issue.  You're unlikely to get your ROI on those when renting.
+1

This is a very reasonable rent vs sell case and you can make a case either way. Very rare on these boards lately it seems.

In addition to the other poster:
How old is the house? Have mechanicals been updated? Are you going to manage yourself? 

And if you are keeping this as a rental, refinance BEFORE you move.  Lock in a rate close to 4% as homeowner occupied, not as a rental.  Hell, maybe even take some cash out of it. 






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Frugal Vegan Mom

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Re: Rent or Sell Case Study - Minneapolis
« Reply #3 on: April 03, 2019, 02:21:46 PM »
Thanks for your thoughts!

The house is 100 years old.  I'm not sure about the mechanicals, not great at that kind of stuff (maybe a hit against me as aspiring landlord?)  I've had no problems since I've been here.  Heat is baseboard style from hot water heater.  Water heater is almost 20 yrs. old. 

I would manage it myself by hire out handy work.  I've looking into refi in the past and my mortgage guy basically told me it's not worth the expense based on refi fees vs amount left on loan. 

Papa bear

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Re: Rent or Sell Case Study - Minneapolis
« Reply #4 on: April 03, 2019, 03:16:33 PM »
Ok. My vote is now for sell. 100 year old houses with boilers and unknowns in mechanicals can be major headaches with tenants.  All of my rentals are 100+ years old, but we’ve gone through and updated most everything.  The one that I get my headaches is the one I didn’t gut completely and start new. 

If you were handy, enjoyed fix it type work, or knew more about what’s behind your walls, I would probably keep it, but it’s just one more in the portfolio. 

Or, use this one to learn if you really want to get into real estate. If you’re wishy washy, sell it.




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J Boogie

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Re: Rent or Sell Case Study - Minneapolis
« Reply #5 on: April 15, 2019, 12:43:00 PM »
You're either not in a popular neighborhood in MPLS or 180k is a bit underestimated. Is 180k just what you're assessed at?

I'm guessing you're probably in a pretty good neighborhood and you could sell for more like 210-260.

I simply don't see anything listed at less than 200 unless it's in an undesirable neighborhood or has major issues like foundation, mold, cat 2 vacant etc.



tralfamadorian

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Re: Rent or Sell Case Study - Minneapolis
« Reply #6 on: April 15, 2019, 02:58:53 PM »
+1 Thoughts from above.

If you want to get your feet wet with real estate to see if you like it as an investment vehicle, it's fine for a rental. Try it for two years and if it's not for you, you can still sell and get the capital gains exclusion.

As far as understanding the capex, you'll learn through being a landlord. Things will wear out and break. Part of learning if landlording is for you is seeing if that stresses you out or if you just roll with it. As far as financials, I would recommend that the property have its own checking account and emergency fund to handle the repairs so you're not dipping from your personal accounts to handle maintenance/capex.

Since it's your first property, I would go through all the major capex (HVAC, appliances, roof, hot water, etc) and make a list of all the ones nearing the end of their useful life. Then get some quotes of what it would cost to replace them if they failed. That would be the balance I would want to keep on the property's checking before pulling out profit for myself.

Frugal Vegan Mom

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Re: Rent or Sell Case Study - Minneapolis
« Reply #7 on: April 16, 2019, 02:46:38 PM »
You're either not in a popular neighborhood in MPLS or 180k is a bit underestimated. Is 180k just what you're assessed at?

I'm guessing you're probably in a pretty good neighborhood and you could sell for more like 210-260.

I simply don't see anything listed at less than 200 unless it's in an undesirable neighborhood or has major issues like foundation, mold, cat 2 vacant etc.

We're in NE Mpls, house is actually only assessed at about $140k.  It is 800 sq. ft. with no garage and no basement.  There is nothing wrong with it, quite a charming house, but far from polished or updated.  I follow the neighborhood market closely, occasionally one this small will come on the market around the $180k price but I guess they go quick because they are cheapest?