Author Topic: Juicy new Case Study- Should I sell or rent?  (Read 1753 times)

Keith Miller

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Juicy new Case Study- Should I sell or rent?
« on: July 19, 2016, 02:07:17 PM »
Sell or Rent, what do YOU think?

Market Value: $264,000
Original Purchase price: $220,000
Original Mortgage Amount: $208,000
Interest Rate: 3.125% (Just refinanced to get rid of PMI and take advantage of Brexit)
Mortgage Term: 30 years
Term remaining: 30 years
Amount remaining on mortgage: $197,000
Gross Rents: 1,800-2,000
Principal and Interest (the P&I of your PITI - should match with the above info): $844
Taxes and Insurance (the T&I of your PITI): $409 Corrected- $168
HOA costs: $220 per month (owner managed, so it should be staying low)
Deferred maintenance notes: Nothing anticipated soon, were good about preventative maintenance. It's a condo, so there's no yard.
Located in Chelsea MA, a gentrifying neighborhood outside of Boston. We've lived here for 3 years now. Its value has gone up 21% in the last three years. As a MMM fan, I am required to state that my wife and I have 61K in student loans, from 3.25-4.6%, that we are paying off as fast as possible (yes, our hair is on fire). I am both tempted to knock out our student loans, as well as stay invested in this neighborhood. It was previously a city in really tough shape, but its only a mile away from downtown Boston, and is becoming a much more desirable place to live.
(Edit: My wife and I are set on moving to MT to enjoy family and the mountains.)
« Last Edit: July 25, 2016, 04:03:26 AM by Keith Miller »

pbkmaine

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Re: Juicy new Case Study- Should I sell or rent?
« Reply #1 on: July 19, 2016, 02:21:54 PM »
Isn't there a third option - living there?

Keith Miller

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Re: Juicy new Case Study- Should I sell or rent?
« Reply #2 on: July 19, 2016, 02:28:14 PM »
My wife and I are set on moving back to my home state of Montana, closer to family and the mountains.

J Boogie

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Re: Juicy new Case Study- Should I sell or rent?
« Reply #3 on: July 20, 2016, 01:17:43 PM »
Well MMM convert, this is not a good rental.  Cash flow would be mediocre.

You can speculate and bet on the neighborhood further appreciating, which could very well be a good strategy.  But many say that condos don't appreciate as much as land+structure does. 

Most around here would say sell and use your capital gains to pay off the student loans with the highest interest rates.

Seems like it'd be a shame to sell it right after refinancing, but then again that's a sunk cost.

I'd say put it on the market for an inflated price and see if you can get an offer close to it.  Something like $295,000.

If there is a desperate to buy couple out there that just HAS to have it, you might get a surprisingly high offer.  That's the cool thing about real estate - it's such a quirky market and people don't evaluate their residence purchase like an investor evaluates an investment purchase.

Good luck!





Keith Miller

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Re: Juicy new Case Study- Should I sell or rent?
« Reply #4 on: July 21, 2016, 04:58:32 AM »
Thanks for your take J Boogle, I appreciate it. One note is I had the math wrong on taxes and insurance, I still had the PMI included, when that has been removed. I corrected it on the original post, taxes and insurance are now only $168.

Dicey

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Re: Juicy new Case Study- Should I sell or rent?
« Reply #5 on: July 23, 2016, 04:50:26 PM »
You could try renting it for two years, then sell it in year three, so you meet the "must live in it for two of the last five years" test for the 500k exemption.

It's a gamble, but if you hand picked your tenants, and the shit doesn't hit the fan, it could work.

Personally, at those rates, I'm meh on paying off the student loans in too much of a hurry. See: Badass arebelspy.

pbkmaine

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Re: Juicy new Case Study- Should I sell or rent?
« Reply #6 on: July 23, 2016, 05:12:58 PM »
Sell.

Jim2001

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Re: Juicy new Case Study- Should I sell or rent?
« Reply #7 on: July 24, 2016, 12:47:28 PM »
You could try renting it for two years, then sell it in year three, so you meet the "must live in it for two of the last five years" test for the 500k exemption.

It's a gamble, but if you hand picked your tenants, and the shit doesn't hit the fan, it could work.

Personally, at those rates, I'm meh on paying off the student loans in too much of a hurry. See: Badass arebelspy.

+1 for Diane's input.

It's effectively a $95000 decision.  I'd suggest taking a look at http://www.realestatetiming.com/home.html and listen to his interviews on YouTube.  You can buy the book for about $30 and do the research on Boston yourself (the MMM way) or subscribe to the news letter in which he apparently is tracking Boston (and the book comes with the newsletter).

I've heard Mr. Campbell speak, bought the book and subscribed to the newsletter for a couple of years (he wasn't tracking my cities when I let it expire and built my own spreadsheet - the book tells you how). In general, the premise is that metro real estate markets move in cycles, which can be measured and the momentum charted.  This decision process triggered the sale on my first rental property at the top of the Los Angeles market in 2006.  According to Zillow, it still hasn't come back up to the price I sold it for.

So, if you're thinking about the appreciation play, this tool kit can help determine when to get out.


Keith Miller

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Re: Juicy new Case Study- Should I sell or rent?
« Reply #8 on: July 25, 2016, 04:08:39 AM »
Thanks for the tip Jim, I'll definitely be checking Robert Campbell out. Turns out I'm not very good at including important information into my case study, I should have mentioned that my wife and I have lived here for 3 years already (I updated the original post with this). Thanks for all the input Jim, pbkmaine, and Diane!