Author Topic: Case Study Request: Sell or Rent?  (Read 918 times)

mhupman

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Case Study Request: Sell or Rent?
« on: February 07, 2020, 10:49:58 PM »
Currently own a 2bed + 2bath townhome in a desirable area.  Looking for a larger SFH as we're outgrowing our current space but trying to decide what to do with the current house - sell or rent?

Market Value: $680k
Original Purchase price: $560k
Original Mortgage Amount: $448k
Interest Rate: 3.875% (10/1 ARM, so would likely need to refi)
Mortgage Term: 30 years
Term remaining: 23 years
Amount remaining on mortgage: $390k
Gross Rents: Estimate $3300/mo (identical attached townhome renting for that amount)
Principal and Interest: $2016/mo
Taxes and Insurance: $757/mo
HOA costs: $0

The rental market here is strong and is that is unlikely to change in the future.  If we refinance to a fixed 30y we can get the PITI down to $2500 which would leave $800/mo to cover expenses.  On the other hand we can sell, take the ~$200k in equity to invest elsewhere and forgo the annoyance of being landlords.  What should we do?

norajean

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Re: Case Study Request: Sell or Rent?
« Reply #1 on: February 08, 2020, 06:03:49 AM »
Sell!  Even with $500/month expenses (1% of value long term for maintenance, repairs, etc), you will net only $3600/yr ($39.6k revenue - $30k PITI - $6K expenses) on your $170K investment. A 2% rate of return.   Slightly higher if you refinance with 20% of $680k down.

Papa bear

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Re: Case Study Request: Sell or Rent?
« Reply #2 on: February 08, 2020, 06:05:06 AM »
Sell it, take your tax free capital gains, and invest in something else.   If you want to be a landlord, look for rentals with better rent to market value %ís. 




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Lucky13

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Re: Case Study Request: Sell or Rent?
« Reply #3 on: February 09, 2020, 11:43:05 PM »
Sell!  Even with $500/month expenses (1% of value long term for maintenance, repairs, etc), you will net only $3600/yr ($39.6k revenue - $30k PITI - $6K expenses) on your $170K investment. A 2% rate of return.   Slightly higher if you refinance with 20% of $680k down.
True but if Rents are going up then OP will be making more than 2% soon enough.  In some areas (Southern California for example) rents have historically increased faster than inflation, and since your mortgage is fixed your profit will increase over time. But still might not be enough to swing towards Rent, but something to consider.

Dicey

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Re: Case Study Request: Sell or Rent?
« Reply #4 on: February 10, 2020, 05:07:26 AM »
Sell it, take your tax free capital gains, and invest in something else. If you want to be a landlord, look for rentals with better rent to market value %ís. 
+1
If you cant be persuaded to follow this advice, at the very least, re-fi while you're still owner occupied. And the "something else" should not be the DP on a more expensive house. If you haven't saved a 20% DP, do nothing until you do.