Hey all,
So I have a rental property (my old primary residence). When I moved out 5ish years ago, rented out mainly b/c of the market at the time (new development, was going to have to undercut new construction to sell, could at least break even in the short term renting). Over the last 5 years, it has become distinctly cashflow positive (although nothing extraordinary). The market in general where I live is good for landlords. Lots of new jobs, both tech jobs and blue-collar. Vacancies for rentals are astronomically low in the area of the city I'm in. With that said, over the last year, the market for sellers has gone absolutely bananas. If I were to put my house on the market today, it would, with almost no doubt, have at least half a dozen offers at/over list price by tomorrow afternoon (in the words of a friend who is a realtor...."I could have your house sold before you went to bed tonight). For some reference of the market, the house is in a suburb of a mid-sized city (metro 450k). The suburb has a population of about 50k. In the city limits of the suburb, there are currently three houses for sale that is < 1750 sq ft. Anything that goes on the market is typically gone before it even shows up on the MLS. Ok, so that's the backstory of the general market. Here are the numbers
Home Value: ~$200k (mind you, this number is climbing pretty rapidly right now)
Purchase Price: $158k
Remaining Mortgage: $127k (8 years into a 30 on a house I put very little down on...the life of young and fresh out of school)
Current Rent: $1395/month
Management Fee: 10% of rent
Current Mortgage Payment (including taxes and insurance): $1030
Occupancy over the last 4 years in my unit is ~95%. That's probably in line with the area of the city that it's in.
Current Lease: Ends in September
Major repairs? Brand new HVAC last summer (10 year warranty on parts), roof has 30-yr architectural shingles. So not expecting any massive repairs anytime soon.
So, as you can see, assuming 90% occupancy, after management fees, I net about $1200/yr. Not a ton. But, given the above 90% occupancy historically and the new HVAC, I expect to end up cashflow positive most years. But yeah, not like I'm pocketing any money month-to-month. I basically keep my $5k "repairs and vacancy fund" filled up. If you assume all of the above about vacancies, assume repairs run ~1% of the value of the house per year, and project out rental rates that outpace inflation by 1%, my calculations show that at the end of my mortgage (22 years from now), I'll have pocketed $49k. If you want to get fancy and say I invest all that profit @ 7%, that gives me ~$88k. And of course at the end of the mortgage, I'd have the equity in the house. Assuming property appreciation outpaces inflation by 0.5%, that'd make the property worth about $220k. Gives me a grand total after selling the property at the end of the mortgage of $300k (today's dollars).
The alternative is to sell now while the market is hot. Assume I get $200k. After fees, $60k in my pocket today. Assuming that gets invested at 7% for the next 22 years, it comes out to....you guessed it....$300k.
Any advice on how to evaluate this decision? Seems like if my house appreciates much more and I could sell for say $210k instead of $200k, I'd be better of selling instead of holding it. Thoughts? If this is better off in the Real Estate Forum, feel free to move it there.
Meanwhile, let's say I sell for $200k. After realtor fees, that nets me about $60k. That same $60k