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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Slee_stack on June 21, 2016, 08:38:52 AM

Title: Case Study: Rent or Sell
Post by: Slee_stack on June 21, 2016, 08:38:52 AM
Originally purchased a house for $144k in 2001 on a 30yr and lived there for nine years.

Never saw much appreciation beyond ~ 2% year over year.  No bubble value for me.  Almost sold just before the market tanked, but seller financing fell through just before closing.

Market tanked and the value dove under $100k.  I didn't have much of a choice unless I wanted to pay someone to buy it, so I rented it out.

Got lucky with a good tenant and they stayed for 6 years.  Now they are leaving at the end of next month.

Value of the house has turned around and is now back up to $135K.

I've felt I've basically treaded water with the house.  Its rented for about equal to what my running costs are (excluding general repairs).  I only gained anything in principal payment, but this has been offset a bit by the general repairs.

If I am fortunate, I can sell the house for $130k minus closing/fees, netting maybe $119k.  After deducting the mortgage balance, I come out with $24k.

Repairs over the last 6 years have totaled $5500.  I refi'd to a lower rate (and to a 15yr) 3 years ago.  That was probably another $2k so in costs.  I expect prep costs in the $1500 range.   So that nets me maybe a $15k return over 6 years.

Of course I also have had the advantage of depreciation (and a small net loss) on my income over those 6 years.   I am also not yet sure how much in taxes I will be on the hook for if I do sell the house this year.

In the end, it seems like it was a pretty poor return, but better than the truly crappy alternative of selling it 6 years ago.

I could look for another tenant instead of selling, but cash flow would remain around zero and it would be a risk of bad tenant against paying down principal further.

Market Value: $135k
Original Purchase price: $145k
Original Mortgage Amount: $138k ($114.5k at refi)
Interest Rate: 3.75%
Mortgage Term: 15 (refi in 2013)
Term remaining: 12
Amount remaining on mortgage: $95k
Gross Rents: $1150/mo ($13.8k/yr)
Principal and Interest (the P&I of your PITI - should match with the above info): $866/mo ($10.4k/yr)
Taxes and Insurance (the T&I of your PITI): $255/mo ($3.1k/yr)
HOA costs: $450/yr (+$200/yr termite bond)