I own a townhome that I manage on my own, where I currently clear about $475/month ($5,700/year). This means that rent minus expenses (mortgage, prop. tax, association dues, water, and insurance). I fully understand there are some other expenses at times, but I'm not including them for this discussion. I have three rental properties so this is the simple math I use for a general gauge.
My mortgage balance is $80,000 and is currently an interest-only ARM. So my principal is not currently declining which makes the comparisons a little easier. I have had the same renter for five years and they are moving out at the end of the month. I have made the personal choice not to increase rent on them for five years but the market has jumped up recently and this year I was going to raise a little, but I had a feeling they were moving due to their child starting school in the Fall.
So I listed it yesterday for $200/month more and should easily get that as it will be one of the cheaper rentals available. So for the discussion, let's assume I will be clearing $675/month ($8,100/year).
While researching rentals in my area, I noticed someone in my complex with the exact same floor plan has their home on the market for $132,500. This will be the first person in nearly 10 years who has attempted to sell at a market price, as all previous sales in the past year were foreclosures or short sales.
But the market is heating up, especially for first-time buyers, as this home is the only listing in my zip code under $150,000 which is Active, all the others have already sold this Spring or are "Active Contingent".
If the homes sells at this price, I know I can get this price as well. With my renter moving out, this would be a convenient time to put it on the market.
So I'm just confirming my logic that if I sold, I'd end up with something like $45,000 - $50,000 in cash. If I keep renting, and with the increased rate, I'm getting about $8,000 year of income. So that's around 16% return on investment ($8000 divided by $50,000) which I could never match investing the cash on my own. So to me this is a no-brainer that I should continue renting as long as I'm willing to do the landlord work.
I wasn't really considering selling my place, however with my renter moving out, at least wanted to think about it.
So just seeking any confirmation I'm making the right choice, or wondering if there is anything I'm not considering in my decision. Thank you.