Author Topic: CASE STUDY: Should we rent or sell our house in Anchorage, Alaska?  (Read 741 times)

Tynay

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Seeking some advice:

My husband and I are moving from Anchorage, Alaska to Colorado at the end of this summer. We bought a house here in Anchorage approximately 2 years ago. We would not have bought it if we had know that we would be moving out of state after only 2 years, but lifeís plans changed. We are considering whether we should rent or sell.

If we rented, we would have to find a property manager because we would not be able to manage the house from such a far distance. If we had a robust group of friends and family in Anchorage who could help us and make recommendations for handymen, etc., maybe we could have, but thatís not the case. Weíve been here only 4 years and we do not have that type of network, so managing the rental ourselves is just not an option. We have been interviewing management companies here. The best-valued company we have found charges a lease-up fee of $600 or Ĺ monthís rent, whichever is greater, and 8% of the rent collected. We are obviously responsible for all repair costs as well.

We purchased the house in April 2016 at 208,500. We did not put anything down. We have two mortgages on the property because at the time we bought we qualified for a program that would make us a second loan for 20% for the purpose of avoiding mortgage insurance.

First mortgage has a current balance of $160,692.76 at 4.00%. Monthly payments are $1,069.92, but gets readjusted on occasion for escrow if taxes or insurance costs change.
   Principal: $274.43
   Interest: $486.26
   Escrow: $309.23
Second mortgage has a current balance of $40,330.91 at 3.75%. Monthly payments are $199.08.
   Principal: $64.43
   Interest: $134.65
Together, monthly mortgage payments are $1,269 with $338.86 currently going to principal and $620.91 currently going to interest.
Total still owed: $201,023.67
Both are 30 year mortgages with 28 years remaining.

Per Zillow, the property is worth approximately $234,000, for whatever thatís worth. We have not spoken to any realtors yet to get comps.

The property management companies have estimated that we can rent the property for approximately $1,500 (we are still waiting on some comp analysis to come in). Thus, assuming we can rent for $1,500, once you subtract the monthly management and lease-up fees, and mortgages, we are left with about $50. We plan we would set aside all the proceeds for maintenance.

We are definitely not getting into the rental business in order to create a passive cash flow and the math on that just doesnít work right now; the purpose is basically to wait out the market here. The selling market here has been flat since we bought; which is better than what people thought would happen as there were predictions of a fall off. There are signs of improvement lately. Although Alaska has been in a mild depression for a few years now, there are large state projects on the horizon (a large natural gas pipeline deal with China, oil drilling in ANWR) that give us hope that the market will come back and maybe even boom. Although, we do not know how long we might have to wait to see the economic come back up here. Nonetheless, we would kick ourselves if we missed out on taking advantage of a big boom that drastically increased the value of our property.

We know that we obviously do not have much equity if we were to sell right now, and that most if not all of it will be eaten up by commissions, closing costs, etc. We just put on a new roof and installed all new windows, so thatís more money we have sunk in to the property.

We need some advice, including tax advice about what will happen if we sell now or sell later.  I am leaning towards renting the house and keeping an eye on the market for a good time to sell to try to get a bit of a return on our overall investment. My husband is leaning towards selling the house now and cut our losses so that we are just done with it and donít have to deal with rental management, continued maintenance, the risks of vacancy, etc. We have not been able to totally convince the other why one option is overall better than the other.

If we want to sell, we basically need to list the house now or soon to take advantage of the summer selling season. I am also concerned about the risk of trying to sell and the house sitting empty for a long time without an income stream to cover the mortgage.

I can answer more questions or provide more information if needed. Thanks in advance!!!

waltworks

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Re: CASE STUDY: Should we rent or sell our house in Anchorage, Alaska?
« Reply #1 on: April 01, 2018, 01:28:55 PM »
Pencils out as cash-flow negative from day 1, so you'd be making a bet on appreciation. I would sell, and consider the lesson learned to be your profit on the "investment".

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GizmoTX

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Re: CASE STUDY: Should we rent or sell our house in Anchorage, Alaska?
« Reply #2 on: April 01, 2018, 02:35:24 PM »
Sell. Long distance rentals are usually a nightmare.

nedwin

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Re: CASE STUDY: Should we rent or sell our house in Anchorage, Alaska?
« Reply #3 on: April 02, 2018, 12:15:12 PM »
My wife and I rented our house in Eagle River for 4 years after we moved away (back to CO, coincidentally).  We were in about the same situation as you.  Our cash flow was positive about $200/month, but the property did not meet many of the benchmarks for investment properties.  We sold in August or September of 2015.  We didn't make money, but I don't think we lost much either. Our approach was really market timing, which is always a gamble.

We were able to manage the property from CO without a management company.  We had fantastic tenants, however.  You can do that also, but you need good tenants and a list of vendors for repairs.

If you're waiting for the gas line, don't hold your breath.  We had the same hopes in 2011.  A gas line was supposed to parallel TAPS when it was built in the 70s.  Drilling in ANWR is more realistic, although it will be several years before anything will come online, and any production from ANWR will only slow the gradual decline from the slope.  It would be better to hope for the price of oil to increase to $100/barrel again.

nurseart

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Re: CASE STUDY: Should we rent or sell our house in Anchorage, Alaska?
« Reply #4 on: April 05, 2018, 02:38:15 PM »
Oh absolutely sell.

SeaWA

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Re: CASE STUDY: Should we rent or sell our house in Anchorage, Alaska?
« Reply #5 on: April 05, 2018, 10:11:58 PM »
Oh absolutely sell.

+1

I'm a landlord to one SFH in Seattle. I have saved myself at least $1K in the past 6 months just by being able to drive over and fix something myself. In your case, that would be months and months of cash flow gone in a flash. Remember it is not just the rental management that you'll pay, you'll also pay a plumber, handyman, electrician, even for stuff you could have done yourself... and they are not inexpensive.