Author Topic: Rent or Sell - Case Study  (Read 2086 times)

Left Bank

  • Stubble
  • **
  • Posts: 102
  • Location: Bend, OR
Rent or Sell - Case Study
« on: July 25, 2014, 02:08:48 PM »
Hi All,
My wife and I are moving this Fall across the country and she is inclined to rent the house out while I see selling as a better financial (and headache-free) option.
Could I get you to comment on which you feel might make the most sense for us?


Market Value: 520k zillow, 475k trulia
Original Purchase price: $430k
Original Mortgage Amount: 299k refi
Mortgage Term: 5/1 ARM,  5 Year just adjusted (down!) to 2.75%
Term remaining: 25 yrs
Amount remaining on mortgage: 280k
Gross Rent: $2200
Principal, Interest, Tax, Insurance payment per month = $1585  good for 1 yr. but can increase by no more than 1%/yr
Deferred maintenance notes: May need a furnace at some point (20yr old) but currently running strong.

Thanks!


waltworks

  • Magnum Stache
  • ******
  • Posts: 3265
Re: Rent or Sell - Case Study
« Reply #1 on: July 25, 2014, 02:24:35 PM »
Horrible rental based on the 1% rule, with nasty (furnace, interest rate) downside risk. Sell it ASAP.

-W

johnhenry

  • Bristles
  • ***
  • Posts: 304
  • Age: 39
  • Location: Midwest
Re: Rent or Sell - Case Study
« Reply #2 on: July 25, 2014, 02:34:15 PM »
Yes, this is a no-brainer.  You should sell.  Especially considering you can bank any capital gains on the place without paying tax since you've been living there.

Another Reader

  • Walrus Stache
  • *******
  • Posts: 5013
Re: Rent or Sell - Case Study
« Reply #3 on: July 25, 2014, 02:52:25 PM »
Zillow and Trulia estimates are not very accurate.  Get an agent in the area to give you a CMA, which is an analysis of the comparable sales. and pending listings plus the active competition.

What are your plans for the future?  Is the move across the country permanent?  What are the chances you will return in a couple of years?  If you plan to move back or are unsure about the move, my inclination would be to rent the house out for a year.  Transaction costs to sell and rebuy would be a large chunk of your equity.  If you will not return no matter what, I would sell.

Finally, I assume you will rent when you move or you do not need the equity in your current house to buy.  If you have plans to buy within a year in the new location and need the equity, then I would sell and bank the proceeds for the new house.

Left Bank

  • Stubble
  • **
  • Posts: 102
  • Location: Bend, OR
Re: Rent or Sell - Case Study
« Reply #4 on: July 25, 2014, 03:41:37 PM »


I am done with New England winters so we will not be returning no matter what.    It seems the winner is SELL without ambiguity.

Calls to the other room.   "Honey, could you come here and see how right I was look at this...?"

waltworks

  • Magnum Stache
  • ******
  • Posts: 3265
Re: Rent or Sell - Case Study
« Reply #5 on: July 25, 2014, 05:40:38 PM »
We can direct you to much more in-depth explanations of the 1%/50% rules if you are interested/need to make a stronger case. You can also ask her if she'd pay $500k for your house as a rental investment - that's often a good way to flip your perspective from "this is something that is mine" to "this is a bunch of my money earning very little and tied up in something I'm not using."

-W



I am done with New England winters so we will not be returning no matter what.    It seems the winner is SELL without ambiguity.

Calls to the other room.   "Honey, could you come here and see how right I was look at this...?"

escolegrove

  • Stubble
  • **
  • Posts: 164
    • Reluctant Landlord
Re: Rent or Sell - Case Study
« Reply #6 on: July 25, 2014, 10:37:37 PM »
What's your longer term goal? Where will this money go if you sell the house? Did you put a lot of money into the house or is the gain appreciation? Are you willing to be a landlord?

My husband is active duty navy, so we are very transient. We buy personals and than rent them out when we leave. Sometimes places we could come back too and other times areas we never plan on living again. We also buy pure investments. That being said we don't follow the 1%, 2% or 50% rules and do great. I call our business model the South West Airlines model. We self manage the property and are able to keep vacancy rates low so we operate on smaller margins.

We use the house as a different retirement basket. We are long term investors. I love the fact that someone else pays off my mortgage and I am able to lock in a low interest rate. I started a blog/website about our method and how to self manage/rent out your house. My parents have had a rental house for 25 years, it was my moms prior to marriage and they kept it when they moved in together. It has been a nice little basket that has grown over the years.