The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: DoNorth on March 17, 2015, 09:30:44 AM
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I bought a house in Northern VA back in 2012. Used a VA loan and it was about $400K at 3.375%. My mortgage payment was about $2K and I received a $3K tax free housing allowance while I was in the military so it made sense at the time and I was close to transportation, near all the big bases/Pentagon etc. and the property has a lot of desirable features like being fully renovated, big yard etc. I've since retired from the military and am going to start FIRE this fall in northern Michigan (but have to return to DC quarterly for another matter). We're debating whether or not to sell or rent the house. After commissions, the property would probably generate between $25K-$30K in proceeds or if we rent it, about $700 in profit/month.
We've had a lot of interest from military folks moving to the area inquiring about renting it, but i don't have a good sense of the real estate market now. Our realtor says there is a lot of pent up demand going back to about November so that could be good, but I'm also hesitant to give up a good investment (if it truly is one). then again, the simplicity of selling is very appealing if we can get a decent offer.
Appreciate any insights from people that have bought or sold in the DC area recently or any general comments about rent vs. buy.
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My personal opinion is if you are FI you do not need the monthly income. 25000/700=36 months to get that same 25000 in rent, not including the opportunity loss. I say sell it for the gain, you are FI and don't need the headache of managing/making sure it is managed properly.
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if you are making 700 profit, you can hire a company to manage it for you.
Don't forget, you pay 6% to sell it, 24K is a crappton of money to get rid of an income producing asset.
I'd say hire a company and rent it out.
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Ummm...are you sure that's $700 profit per month?
What would you actually rent it out for? What would property management costs be? What about repairs and maintenance, as well as accounting for vacancies?
I believe the general rule for rentals is to count half the rent as management and maintenance costs. If so, you would have to rent this house out for $4,000 a month to have a good rental. Is that what it would rent for?
I'm guessing what you mean instead is that your PITI is $2000 per month, and you could rent it for $2700 a month. If that's the case, I would not keep it as a rental. You will likely lose money in the long run, plus have the headache of managing a long-distance rental. Take your cash out and use it to make a down payment on a rental property where you are retiring.
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I live in the
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We have the same question, in the same area, though we are looking out about 2-3 years. There is a pretty strong military/Pentagon and diplomat rental market if you are inside the beltway or maybe just barely outside the beltway but close to metro. If you are that close in, then my opinion (and it's only that) is that the mozar's comment is true only if you are farther out or perhaps in a lesser school district. Keep in mind that after the 2016 presidential election there will be change of administration which usually gives the close-in residential real estate market a boost as appointees and trickle-down employees of the new administration move into town. Based on what I've seen with every administration change since 1990, this will be a substantial, if brief, bump in demand--particularly in the spring of 2017 as folks with kids in school will be vying for houses close to DC that have good schools. It might be worth renting it until then, but you also have to consider the likelihood that interest rates may go up which will have a countering downward effect on prices.
Anyway, I'm curious as to other thoughts on this as part of my own information gathering.
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Been close the there, done that. Military from southern Maryland and got rotated out. We kept the house and had a friend who happens to be a real estate agent and property manager take our house on.
He has a big operation with a couple of employees. Made all the difference. Something happens that doesn't require a license and his guys can fix it at about a third or fourth of a service call. He charged a half month's rent to find tenants and 5% per month to manage.
Back in my Hampton Roads days I had a similar situation while single and deployed, the manager their just called contractors and charged 10%. So this time around I paid less and got more.
Bottom line: as an absentee owner if you use a property manager who you choose can make a big difference. OTOH, pretty sure I know of some who didn't use property managers at all, but then you're on the hook for visiting occasionally to inspect.
You have to do that, too. Learned the hard way when tenants were a little too quiet.