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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: x46412 on December 06, 2017, 01:12:15 PM

Title: Sell or rent? Oahu house. Military and moving.
Post by: x46412 on December 06, 2017, 01:12:15 PM
Hi, my name is Joe and Iím trying to determine if I should sell or rent out my current house. Iím in the military and moving shortly. The house is on Oahu.  I really have no experience or reference in making this decision.  Iíd appreciate all thoughts on sell it vs rent it.

Purchase Price: 677, 500.

Iíve lived in it for about a year.

Current principal: 620,692.87

Interest: 3.25% VA loan.

Last monthly payment 3,102.47. Taxes and insurance included.  Last payment 1,158.67 to principle. 1,684.45 to interest. 259.35 to escrow.
117 quarterly HoA fee.

One relator Iíve spoken to says housing prices are up 5% this year on Oahu.

I bought high, the house is small, has a galley kitchen and I think if I sold I could likely only sell for the price I bought it at, if that.

If I rent it I could probably get 2700-3000/month, which is a negative cash flow.

Renting it out shouldnít be a problem. Iíll be in Tx so being an absent landlord doesnít excite me.  Iím also looking into flat rate relators and for sale by owner, to try and avoid the huge loss in realtorís fees if I sell.

I think if I sold for purchase price Iíd avoid taxes, but again Iím not sure.

Thanks for your thoughts, Joe
Title: Re: Sell or rent? Oahu house. Military and moving.
Post by: waltworks on December 07, 2017, 11:15:34 AM
Sell. Obviously it was a bad decision to buy it in the first place, but that's water under the bridge. If you wouldn't buy it today as a rental, then you should sell it.

You will not pay any meaningful taxes on the sale, as you'll be breaking even at best of losing some money after commissions/title insurance/etc.

If you are not particularly real estate savvy, I'd just suck it up and pay a full price realtor to get it sold. FSBO or flat rate is fine if you have the time/skill/inclination to do your own staging and marketing. Otherwise it's a money loser.

-W
Title: Re: Sell or rent? Oahu house. Military and moving.
Post by: x46412 on December 07, 2017, 07:50:04 PM
Thank you, Walt. Even with depreciation and a strong housing appreciation trend in a Oahu, still better to sell and take the loss in Relator fees? Being mortgage free would sure free up a lot of money for index funds...
Title: Re: Sell or rent? Oahu house. Military and moving.
Post by: waltworks on December 07, 2017, 08:53:25 PM
Yes, it is an automatic sell, IMO. You are going to be cash flow negative *before* accounting for vacancy, maintenance, added insurance costs, etc. You will be hemorrhaging money renting the place. Could you still do ok with enough appreciation? Yes. But it's a HUGE gamble and if the market only rises some, or stays flat, or worse yet declines a bit... you are totally screwed.

Sell it.

-W
Title: Re: Sell or rent? Oahu house. Military and moving.
Post by: Nords on December 09, 2017, 10:22:10 AM
Hi, my name is Joe and Iím trying to determine if I should sell or rent out my current house. Iím in the military and moving shortly. The house is on Oahu.  I really have no experience or reference in making this decision.  Iíd appreciate all thoughts on sell it vs rent it.

Renting it out shouldnít be a problem. Iíll be in Tx so being an absent landlord doesnít excite me.  Iím also looking into flat rate relators and for sale by owner, to try and avoid the huge loss in realtorís fees if I sell.

I think if I sold for purchase price Iíd avoid taxes, but again Iím not sure.

Quote
x46412

Heh.  I recognize that poster name.  825352.

As Walt says, sell sell sell.

Your other option is to lose money every month in hopes of real-estate appreciation getting you back to parity.  The philosophy of "We lose a little money every month, but we'll make it up in the long run" leaves you totally exposed to market forces beyond your control-- but I can guarantee you that you'll lose money until you sell. 

I can't tell you how long the appreciation will take, but in the meantime you'll carry risk (and losses) for years.  You don't want to take that opportunity risk when you could be investing in better rental properties (if that's your passion) or the stock market.

Oahu's current housing bubble is driven by a shortage of new construction.  Yet Ho'opili, Koa Ridge, and several other transit-oriented development projects are in the works and starting sales in a couple of years.  Even more real estate competition comes from people adding small apartments to their homes (and their lots) and renting out their spare bedrooms.  I don't think prices are going to drop but I think they're going to flatten out for a while.

When you do your tax return after the sale, you'll subtract your sales costs from the sale price.  You'll also calculate the cost basis of the house from the expenses you had when you bought it, as well as improvements you made along the way.  All of these will reduce your capital gain and could even turn it negative. 

In general, I think it's best to avoid buying a home when you're still on active duty.  Even after you leave the military it's worth renting for a few years until you're confident that career & community will anchor you for at least five years.
https://the-military-guide.com/dont-buy-home-active-duty/
Title: Re: Sell or rent? Oahu house. Military and moving.
Post by: HawkeyeNFO on December 09, 2017, 02:21:42 PM
The Admiral of Personal Finance and FIRE (aka Nords) is wise.  Take his advice. 

The ONLY way I'd hold on to it is if I knew for sure that I would be moving back there.  Long distance landlording can be quite a pain, even with the best of property managers.