Author Topic: looking for thoughts on renting vs. selling apartment  (Read 1087 times)

MrsMoreWithLess

  • 5 O'Clock Shadow
  • *
  • Posts: 4
looking for thoughts on renting vs. selling apartment
« on: July 31, 2014, 12:50:57 PM »
I posted this on the Ask board but did not get any responses. Hoping someone here on the Real Estate board (didn't even see this until today!) might have some ideas.

We currently rent out an apartment in NYC to a relative who has been taking great care of the place but needs to leave in a few months. The apartment is paid off. At this point, we're not sure if we should cut our losses and sell at what may be an ok but not great price, or find a complete stranger to rent out the place. There are various pros and cons to doing this.

Pros:
-we'd continue earning an extra couple hundred dollars on the side;
-it's in a very desirable location where the price may go up in a few years
-the building's co-op board to conduct requires an extensive background check on a potential tenant and most likely find someone acceptable.
-it's a great asset to hold on to for years and even rent out in retirement or maybe even sell at a really good price in say 10+ years.

Cons:
-the place will need at least $5k or ore in renovations in a few years, eating into profit.
-tenant could end up being crazy and turning place into a Hoarders episode, eating into any profit.
-we live 1000s of miles away from the property and would rather not have to deal with the hassle of checking up on it from afar or dealing with other issues from afar.
-building maintenance fees are going up every year.

Anyone deal with this before? Sound like too much of an anti-mustachian risk especially since this isn't exactly a property the generates a high income we could even live on and we're not dying for the extra cash. I'm also considering the time investment. I'd rather not spend vacation days flying out east to check on the property.

A few questions-- how bad is capital gains tax? I don't think I'm going to make more than $10k-$20k in profit whenever I do sell. Have any of you dealt with this before and found that you actually lost money in the end? In your experience, when is/isn't a piece of real estate, even in a "good" market, worth holding on to? My sense tells me this apartment could end up being more of a headache in the long run but then again, it is a nice apt.

Lastly, what about being a long distance landlord? Bad idea?
« Last Edit: July 31, 2014, 12:53:03 PM by MrsMoreWithLess »

escolegrove

  • Stubble
  • **
  • Posts: 164
    • Reluctant Landlord
Re: looking for thoughts on renting vs. selling apartment
« Reply #1 on: July 31, 2014, 11:09:59 PM »
We have been long distance self-management landlords to 3 houses the past 3 years. We have 5 houses, 4 are rentals. I also run my parents 4 houses, so a total of 8 property.  We have never rented to family or friends. We are on tract to pick up 2 more houses this year. My parents did it locally for 25 year and it turned out to be a great retirement basket. I 1031 the property into 3 more rentals deploying capital gains and depreciations, increasing the cash flow. You an always sell the property and buy another real estate property (rules attached) and not pay any taxes.

This is our FIRE plan. We plan to totally retire in 15 years with my husbands military pension and our houses cash-flow. Our blog/website will have our business model along with a lot of other great resources if you decide to manage it yourself. This is definitely not for everyone. We don't follow the 1%, 2%, or 50% rule. On the other hand we have made a 24% return on our downpayment based on cash flow and 35% or so with principle. Yes we have had some expenses but it has been limited. In my experience the key has been treating it like a business.

Good Luck! 

waltworks

  • Magnum Stache
  • ******
  • Posts: 3444
Re: looking for thoughts on renting vs. selling apartment
« Reply #2 on: August 01, 2014, 08:54:19 AM »
Read the rent vs. sell sticky. Without hard numbers it's impossible to answer any of those questions.

-W