Author Topic: Gross rental income of $4,400 - should we sell for a $600k offer?  (Read 1544 times)

Marvel2017

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Hello, we have a property with two units that grosses rental income of $4,400 total a month. $3,800 after netting out property management fee and mortgage. If we can sell for $600k, should we do it? The values are crazy around here and it doesn't seem the market rental rates have kept up, I'm inclined to sell but wanted a second opinion. Thanks!

Another Reader

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Re: Gross rental income of $4,400 - should we sell for a $600k offer?
« Reply #1 on: April 24, 2017, 02:07:15 PM »
What investment will you buy in its' place?  Will you do a tax deferred exchange or harvest your gains?  If you sell without a tax deferred exchange, in addition to your selling expenses, you will pay income tax on the recaptured depreciation and on your capital gain.  Do the math and figure out where the proceeds will go before you make a decision.

daverobev

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Re: Gross rental income of $4,400 - should we sell for a $600k offer?
« Reply #2 on: April 24, 2017, 02:13:31 PM »
The 'rule' is 2% gross, 50% as expenses. It's more for multi-family stuff. But still; you're getting more like 0.75%. I had SFHs grossing 1.5%...

The question is "what would you invest the money in?"

I would sell and go for a lower hassle deal (in fact, I did - I only own the house I live in now, the rest is in ETFs).

Marvel2017

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Re: Gross rental income of $4,400 - should we sell for a $600k offer?
« Reply #3 on: April 24, 2017, 02:20:01 PM »
The proceeds after paying mortgage balance, capital gains, depreciation recapture, realtors fees, etc etc...we'll walk away with about $400k free and clear. We don't want to invest in other rentals right now, so we would put it into some kind of "moderately safe" investment. My wife is very risk adverse and doesn't like debt so tapping equity to buy other properties is out. We kindof feel our area could be in a bubble and have limited appreciation potential. And there are a TON of apartments in the area coming online and we feel that is depressing the rental rates in our neighborhood. Thanks

chubbybunny

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Re: Gross rental income of $4,400 - should we sell for a $600k offer?
« Reply #4 on: April 24, 2017, 02:28:34 PM »
Since you asked for a second opinion I'll give you mine.  I just sold the last of my rental properties and I couldn't be happier!  We actually celebrated our retirement as real estate moguls and I really feel like such a weight has been lifted.  Sure, we made money okay, but the risk and stress didn't seem worth it in the end. I really hated those calls about the a/c going out!

We are taking the cash and maxing out retirement account contributions, kids' college funds, putting the rest in index funds and saving some in cash for home improvement and a newer car. I know our net worth hasn't really changed, but I feel such a greater sense of freedom.

sequoia

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Re: Gross rental income of $4,400 - should we sell for a $600k offer?
« Reply #5 on: April 24, 2017, 02:30:45 PM »
The proceeds after paying mortgage balance, capital gains, depreciation recapture, realtors fees, etc etc...we'll walk away with about $400k free and clear. We don't want to invest in other rentals right now, so we would put it into some kind of "moderately safe" investment. My wife is very risk adverse and doesn't like debt so tapping equity to buy other properties is out. We kindof feel our area could be in a bubble and have limited appreciation potential. And there are a TON of apartments in the area coming online and we feel that is depressing the rental rates in our neighborhood. Thanks

I would sell.

If you are correct about the bubble, you may have opportunities to buy once the bubble burst in the same area. Or use that cash to invest in different area with higher return (if you want to). 

adamcollin

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Re: Gross rental income of $4,400 - should we sell for a $600k offer?
« Reply #6 on: April 26, 2017, 12:00:07 AM »
Are you thinking of investing in another property, if you sell the current one?