Author Topic: Rental Prop - tired of it?!  (Read 1557 times)

RH

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Rental Prop - tired of it?!
« on: November 05, 2014, 11:41:38 AM »
Hi,

I have a long distance rental property where I have had the same tenant for 10 years. Purchase price was $230K. I'll never be able to get 1%/month rental income  ($2300). Realistically, I could work my way up to getting $1700/mo. I currently get $1450/month.

Value of mortgage is $109K, so I have lots of equity. There's no property in my current area where I live where a 1031 exchange would work.  Am I silly, to simply want to sell the rental prop (market value $310K), pay the capital gains, and the depreciation recapture?...it would be a lot in taxes, but what else can I do if I wanted to sell and no longer be a landlord?

waltworks

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Re: Rental Prop - tired of it?!
« Reply #1 on: November 05, 2014, 11:43:10 AM »
Suck it up and sell it. You did great, it sounds like. 

-W

johnhenry

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Re: Rental Prop - tired of it?!
« Reply #2 on: November 05, 2014, 12:18:31 PM »
I agree, this sounds like an opportunity to sell. 

Keep in mind you don't have to 1031 Exchange residential rental property for residential rental property.  Can be farmland, other business venture, etc.  ..... If you had any other business interests and wanted to defer your gains and depreciation.

Gone Fishing

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Re: Rental Prop - tired of it?!
« Reply #3 on: November 05, 2014, 01:00:38 PM »
Let's look at the numbers folks!

Here's a sample estimated calculation of your return on equity:

Total equity:  201k

Total rental income: 17.4k
Interest:                      5k
Taxes:                         5k
Insurance:                   .5k
Annual repair reserve:  2k

Net Income:                 $4900

ROE based on rental income=4900/201000 so about 2.4% you might be able to add a 3% if you think the market will continue to appreciate based on historical performance.  Based on my estimation you have realized about a 5.4% annual return, not terrible, but not great.  Feel free to correct the numbers and see what you come up with.  But I am guessing there are there better investments, either higher return real estate or stocks.   

One additional consideration is taxes.  You will probably have a considerable capital gain on the sale as it will be your 90k of equity plus what ever you have depreciated over the past 10 years.  If you are in a high tax bracket and only a year or two out from ER, you may consider holding off on selling the property until your income drops.