Author Topic: Keep rental home or sell and invest in index fund  (Read 1892 times)

willisaveenough

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Keep rental home or sell and invest in index fund
« on: June 18, 2017, 10:15:05 PM »
Hi all,

Rental nets about $500 monthly profit.

Equity in rental is about 150K (initial investment 33k)

I expect normal 1-3% price appreciation of rental going forward.

What you think??


PapaBear

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Re: Keep rental home or sell and invest in index fund
« Reply #1 on: June 19, 2017, 03:26:15 AM »
With this information, a qualified answer might be rather difficult. For example, is your stated net profit already factoring in vacancy or a maintenance/repair budget?
Are major repairs expected in the near future?

As this is a "sell or rent" question after all, might I suggest to post a more detailed rental case study in the Real estate and landlording sub-forum?
This thread shows what kind of information is usually helpful for the evaluation:
https://forum.mrmoneymustache.com/real-estate-and-landlording/how-to-real-estate-case-study-sell-or-rent/

An even better initial analysis can be done with the spreadsheet in this thread:
https://forum.mrmoneymustache.com/real-estate-and-landlording/evaluating-a-rental-property/
(use todays estimated value as purchase price, leave closing cost blank)

I guess the key is treating your rental similar to a stock or bond: Would you buy it in today's condition and price point? If yes, keep, if no, sell, and invest somewhere else (after considering tax and selling/purchasing cost implications, of course).
Additionally, what about your personal factors: Numbers aside, what are the goals you want to reach with your investment and what is your time horizon?
Did you enjoy landlording so far or was it rather a nuisance? What is your risk appetite and experience with the stock market?

willisaveenough

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Re: Keep rental home or sell and invest in index fund
« Reply #2 on: June 19, 2017, 10:27:43 PM »
Wow great response thanks.

I guess the key is treating your rental similar to a stock or bond: Would you buy it in today's condition and price point? No I would not buy it today, its up 150k-175K from purchase price. So buying the property today would seriously eat into monthly profit.  Property is by the beach in SoCal so I have absolutely no problem renting it.


 If yes, keep, if no, sell, and invest somewhere else (after considering tax and selling/purchasing cost implications, of course).
Additionally, what about your personal factors: Numbers aside, what are the goals you want to reach with your investment and what is your time horizon?

Goals are too maximize return on investment. I think selling and investing in the market would probably provide a better return going forward.
Did you enjoy landlording so far or was it rather a nuisance?
I don't mind it, not my favorite but it's ok.
What is your risk appetite and experience with the stock market?  I like the stock market, enjoy the risk and return.

Thanks again for response I'll look at the spreadsheets etc.

 

talltexan

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Re: Keep rental home or sell and invest in index fund
« Reply #3 on: June 20, 2017, 09:19:16 AM »
Do you have other California real estate? How does the total exposure to the California housing market compare to other assets you own? You should go for some balance.