Author Topic: Should I rent at a loss for hope if making more money later? Face punches welcom  (Read 783 times)


  • 5 O'Clock Shadow
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I'm planning to move from Honolulu to Houston for a number of reasons, the top one being the astronomical cost of living here. I own a townhouse that I bought about two years ago (I wasn't planning on moving). I'm going back and forth on whether or not to sell. Deep down I think I know it's silly to keep it, but I need some hard numbers to convince my emotional side and my DH.
Here's the details:
Purchased for $322k, have $198k left on the mortgage (yeah I didn't have 20%. Face punch #1)
Today it is valued at $340k by the state, but I've seen comparable units in my area on the market for $350+
Units are renting for $1700-1900 per month, but my housing costs with my mortgage and HOA are $2100.

I would like to keep it because I know it will increase in value over the years. It would also be nice to come home to retire in the far off future, and this way I would have a paid off house.  However, I'll have to cover the gap while also trying to get settled in a new city, plus pay for whatever breaks, property manager etc.
If you smart, mathematically inclined and objective people could help me bring some hard numbers reasoning I'd be very appreciative!!


  • Magnum Stache
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First of all, an HOA is a ticking time bomb.   You will never know when you will be hit with a huge assessment until it's too late to get out of it.  As the unit ages, expensive stuff will need to be fixed.   If you don't know whether the HOA is on a solid financial footing, and won't be able to monitor/influence it to stay that way, you could get hurt.   It only takes one wanna-be fascist overlord to brow-beat a bunch of wimps into doing stupid stuff.   Like giving the insurance contract to a buddy under the table, then discovering (after a fire burns down the place) that said insurance didn't cover the problem.   It really happened.

So, if you keep it and rent it at $1700, you can count on at least $2500 a month in expenses.  (You have to allow for vacancy, for repairs, for property management, and you have to set aside money for the expensive stuff.   $2500 is actually a low estimate on my part...

That works out to an average of $800 a month.  If you clear $100,000 on the sale of the house, and invest that same $800 a month in the market, you could expect a nest egg of $329,000 in 10 years $518k in 15 years and $780k in 20 years.  That's in today's dollars, not future inflated dollars.  The actual amounts would be higher.

If you want to beat the market, you have to have the expectation that your condo would go up a whole lot to beat those returns.

I would not invest in a rental that was cash flow negative unless I knew a whole lot more about the local real estate market than I'm guessing you do.


  • 5 O'Clock Shadow
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This isn't a hard numbers answer.

My advice: If you don't have a burning desire to be a landlord, don't even consider it!

I was in a similar situation about 10 years ago and rented out my condo. We haven't had any HOA disasters and generally have had good tenants but it's been a source of stress the whole time. We've both self-managed and used 2 different property managers. More issues with the property managers than tenants, actually. It's painful to pay a $200+ repair bill for a repair I could do in 10 minutes if I was local.

Meanwhile, our percentage of owner-occupied units has dropped so much that no one can get a conventional mortgage which severely depresses the value/price anyone will pay. This while the local housing market has been booming.

Bottom line: it has been costly, both in cash-flow and stress.

So unless this unit is so unique that you can never replace it or something similar, I would recommend selling it now and moving on. Free yourself from that tie. If you want to be a landlord, buy a rental that pencils out from the get-go. Then when/if you move back, you can look for something that fits your life at that time.



  • Bristles
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My advice: If you don't have a burning desire to be a landlord, don't even consider it!

Even then... it doesn't make sense to pay to be a landlord. The whole idea is kind of funny when you put it like that. "Yeah, let me sacrifice my hard earned dollars so that I can do another part time gig."

No offense meant to OP, of course, nor anyone else in this situation. I just want to illuminate the oddity of the circumstances.

Car Jack

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Rent a property in Hawaii while you live on the mainland?  Even hospitals won't let you out without a credit card to cover anything the insurance doesn't cover (I ended up in Maui Memorial while there, so I know).  Why?  Because people go back to the mainland and know it's too expensive to track them down to get payment.  Same thing the other way around.

Ok....a scenario that happened to me, just 720 miles away, while my house was being rented while I was sent to grad school by my employer.  New tenant comes in.  I have a manager.  I have a solid as granite return date.  Manager ignores that and rents the house for a year.  I go nuts and tell the manager that we're coming back and I need the house.  Essentially, he fires ME.  So now I have no manager and tenants who expect to be in the house for 8 months past my return.  Crap.  I lucked out by the tenants independently finding a cheaper place and leaving with a week's notice. 

So what do you do when your manager quits?  How do you even collect rent?  Do you get on a plane to find a new manager?

Sell the damned place and be done with it.  I wish I had done that myself and simply found a new house when I did return.

Mr Mark

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Sell the damned place and be done with it.



  • 5 O'Clock Shadow
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Thank you all for the responses and shaking me loose from my idiocy! I didn't even really think about what happens if people don't pay etc.

Rich on Money

  • 5 O'Clock Shadow
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No one should ever rent at a loss with a hope of appreciation in the future.  If the numbers don't work now, then assume they may never work.  Your numbers don't look good.  If the cash flow doesn't look good now, you are far better off selling, and finding something better to do with your money.  Rental properties in Hawaii almost never work out.  If you want a rental property, make sure the cash flow looks good now.  Appreciation should be a bonus, not a hope.


  • Walrus Stache
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I was going to scream, "Sell!", but I see there's no need to yell. Good decision, OP.