Author Topic: Sell or rent out my house??  (Read 4762 times)

Ticopowell

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Sell or rent out my house??
« on: February 25, 2014, 12:46:35 AM »
Hey all, I am just starting to grow my 'stache, and I have a first question to start out with. I have a long way to go before I can claim to be mustachian, but this might be a start.
My question is if I should rent out, or sell my house. I am in the military and I will be forced to move within a year (most likely... nobody knows these days). Either way I am not going to buy a house at my next base, I don't want to have to worry about this dilemma again.
Details:
The house is a 1500 square foot house on about 10,000 square foot lot. 3 bedroom, 2 baths, and a very nice home theater that I put in (I guess MMM and I have that in common). It is Brand new, we are the first owners ever, and the neighborhood is very nice... for about a block or two. Just outside of our neighborhood is a less than stellar place to live, but it is close enough to affect my house value. The backyard is currently bare, but the front is completely landscaped.
Our original loan was for $206000 in April 2013, we have paid $1200 a month(including insurance), and are now down to $203000. We are getting 3.5% interest on our mortgage, we got a VA loan with 0% down. We had planned on living in the area for 3-4 years, but the Military has a different plan, so at most I will have about 2 years in. I got an online appraisal for the house value and it is between $200-$230000 right now. Based on the original builder's website the same house today goes for about $225000 plus options (ours had about $8-10k worth).
As far as local renting prices I think I might get $1400-1500 out of it a month. I would have to have a property manager because I don't know where I will be. While I knew my airplane was leaving my base with about 6-700 airmen, The news just announced that another plane that is only stationed there is moving, with their 1-2000 airmen, so the housing market will probably be hit pretty hard over the next year. This means that if I want to sell I should do it quickly, and if I want to rent I should move out and find a tenant with a good lease very quickly because I live about 5 miles from base and the market will be flooded with nearby houses.

Option 1: Sell the house for as much as I can, use the extra money (if there is any) to pay down my punch-me-in-the-face-really-hard 2013 Mustang and 2006 F-150 (upside down on both or else I would sell at least one right now). I would then sell one, or both vehicles and downsize a lot. My wife loves the car but she might be reasoned with to get a more practical vehicle. We hardly drive the truck unless we need to, such as camping or building materials and I now know that I can do all that without a truck.

Option 2: Rent the house, pay a property manager, and hope that I can break even. It is a new house so I don't expect anything to break anytime soon, but something always does so I am not sure how smart that option would be. I figure that if I break even on the rent vs repair costs ratio I will end up ahead a little because I will have paid down the mortgage for free.

Like I said I have a long way to go, but this is as good a time to start as any on my new 'stache. I currently make about $70k a year but most of that is going towards the house and car payments, and a few credit card debts too. After taxes I take home about $5300 a month, but we only spend about $1200 on necessities, the rest is paying down debt.

Let me know what you think would be my best option. Thanks!

CrochetStache

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Re: Sell or rent out my house??
« Reply #1 on: February 25, 2014, 05:12:21 AM »
Unless there is something coming into your area that will replace all those lost gov't jobs (both mil & civilian) I would try to sell it as fast as possible.

Not much good news happening for military & gov't workers with all the "reduction in force," "workforce shaping" and "workforce affordability" talk out there.

Keeping your own expenses as low as possible and your flexibility as high as possible are key factors in surviving and hopefully still saving in these kinds of upheavals. Between the military and gov't civilian employment we have moved 9 times in the last 14 years with as little as 2 weeks notice.

Many of our friends have tried renting out their houses but I have yet to hear of anyone who actually has been able to break even let alone make any money from renting out their house.

If this was your family home, built by your granddad or something that might be different. But I suspect you will see several more areas of the world before you are able to settle down and choose THE home for you and your family.

Good Luck!

Ticopowell

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Re: Sell or rent out my house??
« Reply #2 on: March 02, 2014, 03:49:37 AM »
Thanks for the reply, that is pretty much what I have been thinking of doing. It's always good to hear the same from someone else.

honobob

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Re: Sell or rent out my house??
« Reply #3 on: March 02, 2014, 04:06:04 AM »
Why did you buy less than a year ago in an area so heavily dependent on the military work force when base closures have been a fact of life for the last decade or two? 

Ticopowell

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Re: Sell or rent out my house??
« Reply #4 on: March 02, 2014, 04:39:44 AM »
The biggest reason was that my wife wanted a house, and we didn't know the market very well. I looked at renting but the rental prices were outside our range for something the same size as what we bought, and now rental prices have gone down, and house prices have gone up. Had we bought a house a half hour south it would have been in a great commuting area for Sacramento (for the non-mustachians), but we didnt want to commute ourselves so we moved just outside of base.
Once I got to the area (wife went house hunting and picked the house we bought, the AF didn't let me go to the area until after I officially moved) and talked with people there I didn't want to buy, but we had already signed saying that we would. Also I was planning on being there for 3-4 years like most people, but again the Air Force has different plans... of course they didn't tell us what the plan was until it was too late to back out of the house.
I figure that selling it now will get us at or above the break even point, so overall it will have been a hassle, but no real monetary loss... I hope at least.
I am trying to make the best of the situation, so any other help is appreciated!

lentilman

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Re: Sell or rent out my house??
« Reply #5 on: March 02, 2014, 06:27:58 AM »
If it was me, I would try to sell ASAP.  It sounds like the local housing area is about to take a dip and long distance real estate rentals can be ugly.  The peace of mind alone would be worth getting rid of it, IMO.

Fireman

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Re: Sell or rent out my house??
« Reply #6 on: March 02, 2014, 07:01:11 AM »
Where is arebelspy when you need him?!

I'll jump onto the sell bandwagon.  I was in your situation 2.5 years ago when my now ex got a new job at a different base.  We ended up renting out our townhouse and renting another property as our residence.  Fortunately, it was only about an hour away and I worked in the same area as the rental property.  We were just over the break even point and had no savings built up for property emergencies.  However, I fancy myself pretty handy and have been able to perform all maintenance with the exception of window replacement (assisted) and HVAC stuff.  The same tenant is still in place and i've been very fortunate that there have been very few issues.

With your PCS most likely being out of the area, you will need a property manager and will lose approximately 10% of your rent there, putting you below the break even point.  Further, any time the tenant has an issue, you wouldn't be able to eyeball it and would have to go on their (or the property manager's) word that it needs to be fixed. 

If you were staying in the area, I could lean towards renting but as it is, selling looks like the better option. 

Another Reader

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Re: Sell or rent out my house??
« Reply #7 on: March 02, 2014, 07:44:52 AM »
The Sacramento area has generally been appreciating for the last couple of years.  This is not a house I would buy as an investment, but I would have to know where it is before I would suggest selling.  The "just outside the area is not a stellar place to be" comment leads me to believe you are in an area where I would want to sell and cut my losses today.

Blindsquirrel

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Re: Sell or rent out my house??
« Reply #8 on: March 02, 2014, 09:29:17 AM »
 Another vote for sell ASAP.
1. Market is going down for your house. Do not ride it down. If you knew a stock was going to tank would you sell it immediately? Your house is a 1 share company that is heavily leveraged, trades at a horrible P/E, will face strong competition in the near future, and is in a shrinking industry.
2. It is not a good investment as a rental at all. The price is way high for the rents you are getting. If I have 206,000 invested in RE it should turn out about $3200 a month and count on netting $1600. I know we have a great rental market but even in a HCOLA it would suck as an investment.
3. You have no idea where you will be. Long distance love is hard, dealing with a poor cash flowing house that you owe a stack of cash on is way more painful.
4. One bad tenant can cost you a GD huge stack of money and you will be too far away to deal with it.

Weedy Acres

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Re: Sell or rent out my house??
« Reply #9 on: March 02, 2014, 10:14:46 AM »
Sell.  I would never voluntarily be a long-distance landlord.  Been there, done that, sucks.

LDoon

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Re: Sell or rent out my house??
« Reply #10 on: March 02, 2014, 10:44:13 AM »
Vote for sell in this situation.  Sounds like if you did rent the house, it would break even (rent + prop. managment fee) but that is best case scenario (no repairs, no vacancy - which is a fantasy) but not provide income.  If property values go down, and it sounds like they will unless new employer moves in to the area, this house will cost you money and be a headache for the foreseeable future.

Take advantage of your thinking ahead about the area and sell now.

Nords

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Re: Sell or rent out my house??
« Reply #11 on: March 02, 2014, 06:07:24 PM »
As far as local renting prices I think I might get $1400-1500 out of it a month. I would have to have a property manager because I don't know where I will be. While I knew my airplane was leaving my base with about 6-700 airmen, The news just announced that another plane that is only stationed there is moving, with their 1-2000 airmen, so the housing market will probably be hit pretty hard over the next year. This means that if I want to sell I should do it quickly, and if I want to rent I should move out and find a tenant with a good lease very quickly because I live about 5 miles from base and the market will be flooded with nearby houses.

Option 1: Sell the house for as much as I can, use the extra money (if there is any) to pay down my punch-me-in-the-face-really-hard 2013 Mustang and 2006 F-150 (upside down on both or else I would sell at least one right now). I would then sell one, or both vehicles and downsize a lot. My wife loves the car but she might be reasoned with to get a more practical vehicle. We hardly drive the truck unless we need to, such as camping or building materials and I now know that I can do all that without a truck.

Let me know what you think would be my best option. Thanks!
A couple of comments:

1.  If you were hardwired to be a landlord, you wouldn't be posting this question... you'd be hiring a property manager and getting a tenant.

2.  The fact that you already know the military is downsizing your area means the local market is going to get much worse before it gets better.  You might be able to count on your property appreciating at about the rate of inflation over the next decade, and rents will eventually follow suit.  However for the next 2-5 years you're going to be hemorrhaging cash while you make the place ready to rent and find tenants and deal with other disruptive expenses. 

If you want to sleep comfortably at night then you should sell.  Not only should you sell, but you should try to price it below market so that it moves faster than the new properties the builder is putting up.  Your ideal situation would be selling it a month or two before you move, and then being able to rent it back from the new owners for a few weeks before you transfer.  If you offer a combination of low price and renting back then the new owners may be motivated to close the sale quickly.

Instead of thinking of this sale in terms of what other houses are worth, think of your sale in terms of how you'd feel if you were transferred and had to make another six months of mortgage payments while the place was vacant.  For that reason you might want to try to do everything in this post:
http://www.caniretireyet.com/how-we-sold-our-house-in-24-hours/

Ticopowell

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Re: Sell or rent out my house??
« Reply #12 on: March 04, 2014, 12:26:28 PM »
Well I didn't see any posts saying to keep the house, and I agree, I will sell the house. The only issue right now is when... My wife doesn't want to move again before we have to, and I don't blame her, and with our dogs it will be tough to find a good place.. most will be farther from base costing more gas money too so that sucks. I will definitely try and rent it out from the next owner if possible, but if I don't want to rent it out, I don't see anyone else renting it either...

According to the builders website the new houses go for $225000, and ours had about $10k in options such as cement tile roof, appliances, blinds, 8 tiles by the front door, and a few others I can't remember. I have painted 1 room and installed a hardwired surround sound for it, probably $1-2000 of work. It is also wired for the projector if the next owner want's that option.
I think setting the price at $230000 would be fair, and reasonable, but it is a year old, so I don't know if that adds or subtracts from the value. What do you all think on the asking price, is that enough, or should I really drop the price and get almost none of the equity out of it?
I think if I put it up for sale now at $230000 and see what offers come up, if any, then lower it as needed until it sells might be a good option.
The current loan is about $203200 and there is $3000 in the escrow account, not sure where that goes when I sell, but I would imagine that since it is my money (in theory) I would get it either towards the loan or back to me to help on the selling costs... but again I don't know.
Thanks again for all the help!

Fireman

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Re: Sell or rent out my house??
« Reply #13 on: March 04, 2014, 04:09:51 PM »
Look at the market and comparable house sales nearby.  Zillow is an easy way to look at recent sales and you can often see pictures of those houses to compare condition to your house.  I would add verbiage in the listing so the potential buyer knows you want to live there until whatever date with the possibility of a delayed closing or a rent back.  The buyer may want to jump on the house but not be ready to move, much like yourself.

As for the escrow, I would think that you'd get back all monies minus the outstanding balances of property tax and insurance.  This will depend on your mortgage holder, locality, and insurance company.

Ticopowell

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Re: Sell or rent out my house??
« Reply #14 on: September 02, 2014, 12:41:56 PM »
I have an update for everyone/anyone that cares, I put the house up on the market, and since may when it was put up we received 1 bid. I tried lowering the price but my now ex-wife won't let me. She says that she isn't in a hurry to sell. We put the house on the market at the new house without options asking price, and while it was up at least 2 new houses sold for $10-15k more than our asking price.
Because of all this I let the listing expire and am now going to rent the house. I did receive orders so I will be leaving the area within a month, so now I am researching local property managers.
If anyone has any they trust in northern California let me know, I am about 45 minutes north of Sacramento. Thanks!

SenoritaStache

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Re: Sell or rent out my house??
« Reply #15 on: September 02, 2014, 03:19:16 PM »
Sell as quickly as possible.  Renting it doesn't work because your monthly income on it is not worth it, some tenants are not as caring with your home as you maybe and when they move out you will need to fix out of your own pocket possibly.  Then the property manager will take a chunk of your $.  Not worth it just sell now and get it over with.  Good luck!!