Sell or rent my town home?

[Transcensionist]

Have been trying to sell for a couple months. Initially listed at $182k, now down to $175k but still seeing very little activity.

I owe $126k at 3.875%. I think property taxes are $1800 annually.

I believe I could rent at $1300 to $1500, which would go toward my mortgage + association dues ($234.)

How do I calculate when it is best to rent a property vs reduce price and sell it? I started MMM at the beginning and am a few months in (July 2011 articles or so.) I see him talk about having a rental returning a % of its value and 7%+ being a decent return.

That being the case, is this my equation?
[(rental payment - association dues)* 12 months - property tax] / estimated value of property
Best case: [(1500 - 234) * 12 - 1800)] / 170,000 = 7.8%
Worst case: [(1300 - 234) * 12 - 1800)] / 170,000 = 6.4%

I took the value at 170,000 since that might be what we'd have to reduce to to make a sale.

Is it a consideration that my monthly mortage payment is 1,276.79? (Covers principal, interest, taxes/escrow, etc.) I am a few years into a 15 year mortgage on the property.

Should I consider that I bought the property for 192k in 2007?

I realize I need to value my time managing the property as well, and the risk of getting a tenant that stops paying (planning on checking for a high credit score & performing a background check.)

I'm likely missing more costs that go into this. But also have not factored in any tax write offs for any of the costs involved. Plus being able to depreciate the value of the rental. I don't really understand this yet.

[kudy]

Once you factor in possible vacancy between tenants and maintenance, it may not be a great investment as a rental. Of course, you'll have the potential to gain equity in the house, but I think the realistic ROI is going to be a bit less than the calculator 6.4-7.8%.

[Transcensionist]

I didn't include interest I'm paying on the mortgage in the calculation. That's where things get pretty fuzzy for me though for a couple factors.. interest going down over time and gone completely in 12 years when the property is paid off, interest being a tax write off.

Currently paying $410 / month interest. It's dropped a couple dollars since last month.

Also, we are only putting 5% down on the new house right now. So getting $30-40k off a sale (less fees) would be good to put to our new mortgage to work on getting to 20% and getting rid of PMI.

[frugaliknowit]

It depends on weather you are trying to estimate a "capitalization rate" (google it) or "cash on cash" rate of return (google it).

http://www.annettecooper.com/cap-rates-vs-cash-on-cash-returns/

You could factor your time in as an added expense to reduce the income and/or cashflow.