This is a bad idea, right?

[ritchie70]

Hi, folks.

Current house doesn't suit us, so I'm just exploring all options.

Located in Dupage County, IL, a Chicago suburb, our real estate agent says it would sell for around $370K.

Rent for houses around here, unless fabulous mansion, seems to run around $2500 for this sort of house.

Monthly costs are roughly $2150 for loan, tax and insurance.

2150/2500 = 86%
2500 - 2150 = $350 gross monthly profit (before maintenance and etc.)
2500/370K = 0.675%

This is leading me to conclude that unless the damn thing just absolutely will not sell, continuing to own it and renting it out would be a bad plan. I'm right, right?

[marty998]

I would tap that. Provided you get reasonable capital growth.

Waltworks is going to come here and tell you sell up and run for the hills.

[ritchie70]

Umm, so you think that's an OK deal? I honestly can't understand what you're saying. Maybe I'm too old and un-hip.

[Another Reader]

Marty998 is in Australia, where you can't squeeze cash flow from anything.

As a US landlord with many years of experience and a lot of properties, my opinion is that over time this property is a money loser.  Unless it's clear that the market is appreciating rapidly, rents are increasing, and you want to speculate on them continuing to do so, I would sell.

[ritchie70]

Marty998 is in Australia, where you can't squeeze cash flow from anything.

As a US landlord with many years of experience and a lot of properties, my opinion is that over time this property is a money loser.  Unless it's clear that the market is appreciating rapidly, rents are increasing, and you want to speculate on them continuing to do so, I would sell.

Ah, that explains it. I keep seeing "2% rule" and "1% rule" so I wasn't really feeling it based on the numbers.

We cleverly bought in 2004 so it's down about $50K from where we bought, and thanks to its two-floor nature and my wife's recently aggravated medical issues we really need to get to a single story house ASAP.

Not included in the $2150 is a home equity line that adds another $350 a month payment, but it got spent on stuff other than the house, so I wasn't considering it for these rental property calculations. To sell, however, we need to get enough to pay off mortgage, and HELOC, and closing costs, and have some left to go toward replacement house. That math is pretty tight, so I'm exploring options.

[johnhenry]

I would tap that. Provided you get reasonable capital growth.

Waltworks is going to come here and tell you sell up and run for the hills.

I would tap that..... equity you have built up by selling this place and NOT enduring low (or negative) cash flow by renting it.

I am also surprised that Waltworks hasn't smacked your hand with a ruler for even suggesting this.  :)   Only joking.  I agree with Walt 99% of the time on his rent vs. buy advice. 

[waltworks]

My job here is done.

Muahahaha!

Wait, if I was evil, I'd tell you to hold onto the place...

-W

[Radagast]

It seems to me that vacancies, maintenance, and other unforeseeables (by me anyway) would more than eat up that $350. Sell.

[marty998]

haha. yes, cannot squeeze a CF dollar from any rental in Orstaya. It's all about growth.

Your market is different. We get to the same end by different paths