Author Topic: Keep renting or sell?  (Read 350 times)

jennigens

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Keep renting or sell?
« on: February 11, 2021, 11:08:20 AM »
After a nudge from someone in my updated case study, I decided I should drop some numbers here. In my mid- to late-20s, I bought my house as a single woman (which was NOT an easy feat, as I had sellers ask where my husband was, how I would change the air filter, raised price when I made offers, etc.). Interest rates were high, but also I had horrible credit and probably should not have purchased when I did. I lived there alone for about 9 years until I reconnected with my now-husband, and he moved in.

In fall 2019, a house two and a half blocks away in our historic district went up for sale, and we went and looked at it and purchased it in short order as it had more space, better layout, and nicer finishings. Much better interest rate. I toyed with the idea of renting the previous house (in part because I'm sentimental about the house), read some posts here, and talked to my husband who was on board. We moved, emptied the house, did some minor repairs, and rented it out within a month (strong rental market here). We've had the same renters since then who signed another year lease in October.

House:
Purchased at $72,000 with 30-year mortgage, 5.5%* interest (ouch, I know); owe $54,000; could probably sell now for $98,000 to $105,000, though we have a stronger rental market at the moment.
House is 116 years old but with updated electricity, plumbing, insulation work, new drywall done in 2008-2009 to restore home to single family from duplex (prior to me).
2 bedroom, 1.5 bath with in-home laundry and rear large shed

*I have made efforts to refinance but have been told by multiple lenders that they would not (or it would be cost prohibitive) to refinance such a small amount. We plan to begin making two extra payments a year this year.

Mortgage:
Principal: $146.74
Interest: $249.09
Escrow: $374.26 (must have windstorm insurance where we are)
Total: $770.09/mo

Rent: $1150/mo

Maintenance:
Pesticide: <$50 annually (I do it myself and just purchase supplies)
Lawncare: $0 we take care of the yard
AC/Heat Annual Check: $60
Air Filters: <$50
Total: +/- $100

Repairs:
October 2020: Replaced rotten siding and window sills, $3k with supplies (this was a planned repair)
December 2020: After city replaced their main line, our main line from city supply to house (cast iron) failed, and we had to repair, $5500 (unplanned repair but had cash reserves to pay it)
Total: $8500

We are rebuilding the HY savings account for this property after year-end repairs wiped out those funds. Only other debt is our current house, $148,000 at 3.15% and a low-interest student loan of my husband's, $4,200 total.

waltworks

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Re: Keep renting or sell?
« Reply #1 on: February 11, 2021, 12:08:54 PM »
Maintenance costs have and will continue to kill you here, the house is just too old - and even a newer structure will require at least a couple hundred dollars a month to maintain.

Even if you assume no maintenance, for $350 a month in profit, it's hardly worth doing the management/yardwork yourself. At looking it in terms of net cashflow, you're down something like $7-8k after a year already, not including your time/labor.

This is a classic example of the 1% rule breaking down badly at the low end.

Sell it.

-W
« Last Edit: February 11, 2021, 12:15:00 PM by waltworks »

Dicey

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Re: Keep renting or sell?
« Reply #2 on: March 06, 2021, 05:28:51 PM »
What Walt said.