First, welcome to the forums! I swear we are usually faster with answers than this, but your question is proving to be a tricky one. I’m going to give it a shot and hopefully it’ll spur some other comments to help sanity check.
TLDR: keep renting it out
Since you were able to buy it with no money down, and since it has gone down in value, you have very little equity invested in it. Selling it wouldn’t net you much money at all, and having $402.14 getting paid down on the principle each month is a high return on the small amount that you have invested.
You currently have $25,286 in equity. Rents minus costs nets you 519.85 each month excluding maintenance. Although $402.14 of that is going to pay down the principle of your mortgage and isn’t cash flowing, you can still count that as returns that the rental is generating. So this rental is generating $6,238.20 per year, a 24.7% return on your $25,286 equity.
Now this wouldn’t be the way that a real estate investor would value this. They’re typically trying to maximize cash flow and this property doesn’t cash flow. But you’re in a unique situation where you didn’t put any money down and have a pretty low interest rate and selling transaction costs would eat nearly half of your equity. So I think it makes financial sense to keep renting it. You’ll want to revisit the numbers in a few years once you retire and your property tax liability goes up.
You can also estimate the money you’d be left with if you sold it. 6% of the sale price goes to realty fees, another 1% for closing costs, which leaves you with $12,196 that you’d walk away with, assuming that you were able to sell for the current market value of 187,000. So you could even think about that $6,283.20 per year as returns on $12,196 equity, since that’s what you would actually be able to get out of the transaction, a 51.1% ROI!
One thing that would be good to get a handle on is the average yearly maintenance expense, since I didn’t see that in your numbers. As long as it’s less than about $3k then the numbers still are good, providing that you can cash flow that since that’d be more cash than what could be covered by the monthly rent. You’ll also want to consider how many days of vacancy your property manager averages between tenant turnovers and pad that into your estimated expenses.
Another thing to consider would be changing the lease so the tenants pay for the $100 per month lawn maintenance instead of you. That’d be a big boost to your bottom line.
Hope this helps, and hopefully we can get some others to weigh in!
