Author Topic: Got Married & Moved - Sell v. Rent my Starter Home?  (Read 2681 times)

BalletBabeSeattle

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Got Married & Moved - Sell v. Rent my Starter Home?
« on: February 06, 2015, 11:51:26 AM »
Hi All,
Thank you in advance for your thoughts & advice. 

I got married 18 months ago, we bought a new house locally and moved in together.  We kept both old houses as rentals.  His is rented, cash flow positive, and currently stress-free.  Mine was rented, is now vacant and I'm struggling to decide sell v. rent.  We don't enjoy landlording, but are willing to do it if we can come out significantly ahead of cashing out and investing the $$.  We would probably walk away with about $200k after fees from the sale.  If we invest that today and it doubles in 10 years, it seems that the 4% withdrawal rule would allow us a similar income to what the rent would produce once the house is paid off in 9 years.

Should we:
1. Rent the house for 1 year and sell before cap gains benefit expires (7/2016), gaining $400/mo cash flow + ~8260 in principal reduction ($13k profit before expenses)
2. Rent the house indefinitely, producing income of $1200-1400 (rent - tax/ins) after it's paid off in 9 years
3. Sell now, pocket ~$200k and invest, anticipating 7-8% return
 
I'm leaning toward selling, but don't want to leave money on the table.  Would love to get some help with the math and the decision!

Market Value: $320k
Original Purchase price: $172k
Original Mortgage Amount: $137k
Interest Rate: 4.5%
Mortgage Term: 15 year fixed
Term remaining: 9 years, 1 month
Amount remaining on mortgage: $85,542
Expected Rent: $1650-1750/mo
Mortgage payment - Principal and Interest: $1009/mo
Taxes and Insurance: 333/mo
HOA costs: 0
Deferred maintenance notes: Very small 1942 cottage, good condition, has septic tank and slightly finicky plumbing (occasional slow drains, etc).  I worry about a renter flushing baby wipes or something and ruining the septic.  My neighbor next door had a tenant do that and had to hook up to sewer for $30k.  That risk makes me nervous!

Thanks for your thoughts & ideas!!

escolegrove

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Re: Got Married & Moved - Sell v. Rent my Starter Home?
« Reply #1 on: February 06, 2015, 11:58:14 AM »
Everyone has their own opinion!

We like real estate as it is a great retirement basket! The equity is great but the key is to be able to use it to earn higher profit than its current state :)

I actually wrote a detailed article back and forth on this issue for bigger pockets!

http://www.biggerpockets.com/renewsblog/2014/12/29/sell-or-rent-out-home-factors-to-consider/

That being said, it usually comes down to a personal decision. Yes renters have their moments, but I find with a detailed lease (mines 14 pages), a well screen tenant being a landlord can be a successful operation. That's from someone that self-images them from across the country :)

clarkfan1979

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Re: Got Married & Moved - Sell v. Rent my Starter Home?
« Reply #2 on: February 06, 2015, 01:51:13 PM »
I stopped reading your post after you said that you don't enjoy landlording. If you don't enjoy it then come up with a plan to sell it. I think blog is about creating a plan so you can enjoy life.

BalletBabeSeattle

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Re: Got Married & Moved - Sell v. Rent my Starter Home?
« Reply #3 on: February 06, 2015, 02:45:26 PM »
Clarkfan, excellent point!  I am so focused on maximizing returns that I wasn't thinking about quality of lifes  Peace of mind and no drama is worth a lot.
Escolegrove, thanks for your response. I actually stumbled upon your article early this morning while doing some research. You have some helpful points. How nice that you responded!

escolegrove

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Re: Got Married & Moved - Sell v. Rent my Starter Home?
« Reply #4 on: February 06, 2015, 03:54:42 PM »
Glad I can help!

Good Luck :)

waltworks

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Re: Got Married & Moved - Sell v. Rent my Starter Home?
« Reply #5 on: February 07, 2015, 09:49:42 AM »
House horribly fails the usual metrics for a rental, and you don't want to be a landlord? Sell immediately.

Escolegrove, at what house price/value would you recommend selling? I'm curious.

And, of course, no rent/sell thread can be complete without this:
http://forum.mrmoneymustache.com/real-estate-and-landlording/examples-of-rentals-you-own-that-perform-well-financially/

-W
« Last Edit: February 07, 2015, 10:02:39 AM by waltworks »

BalletBabeSeattle

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Re: Got Married & Moved - Sell v. Rent my Starter Home?
« Reply #6 on: February 07, 2015, 08:53:32 PM »
Thanks, waltworks!  I just spent an hour reading that thread and it was super informative. I hadn't seen that one yet. The answer seems pretty clear.