Moving to a new city. Should I sell or rent my townhouse?

[bornInFlorida]

Folks, please help me decide whether I should sell or rent my property. I am moving away to a different city due to family reasons and have no plans on returning.


Market Value: $535,000 +
Original Purchase price: $240,000
Original Mortgage Amount: $200,000
Interest Rate: 4%
Mortgage Term: 30 years
Term remaining: 25 years
Amount remaining on mortgage: $272,000 (refinance my original mortgage and took some money out).
Gross Rents: $2,700 + (monthly)
Principal and Interest (the P&I of your PITI - should match with the above info): $1,400/monthly
Taxes and Insurance (the T&I of your PITI): $350/monthly
HOA costs:$345/monthly
Deferred maintenance notes: None

Excellent schools. Townhouse. HOA covers outside of the house. Townhouse was build in 1974. When I moved in 10+ years ago, I upgraded everything (appliances, central AC, heater, bathrooms, kitchen).  Overtime, I have put at least $60,000+ in upgrades.

I don't think I plan to move back to this townhouse. Also, since I will be in a different city and am pretty busy usually, I don't want to deal with managing the property myself. Will have to hire a property management company for finding renters and management of the property.

I am going to be purchasing a house to live in a few months in the new city. I do somewhat need the sale proceeds from this house to buy a new house but I don't absolutely need it given that there are 10% down payment (Which I already have) loans in the market where you can avoid PMI.

Please help me decide whether I should sell or keep it? Thank a ton in advance :-)

[FINate]

If you've lived there 2 of the past 5 years then SELL! Take advantage of the home sale exclusion of $250k ($500k married filing jointly) of tax free capital gains. If you've kept records of the upgrades then some/all of the $60k should apply towards tax free as well.

And the cash flow isn't great: After management fees (typically about 8% off the TOP), mortgage, taxes and HOA you're looking at about $390/month in income...that can very quickly be eaten up by maintenance (something always happens), vacancy, or any number of other unforeseen events. Just doesn't seem worth holding onto.

[waltworks]

Sell. You have ~$250k in equity tied up doing nothing, if not slowly losing money due to ongoing maintenance, plus wear and tear from renters on your high end stuff/finishes that will hurt resale value down the road. Plus you have a capital gains exemption.

No brainer.

-W

[bornInFlorida]

Thank you waltworks and FINate for your feedback.

[Usury]

If you've lived there 2 of the past 5 years then SELL! Take advantage of the home sale exclusion of $250k ($500k married filing jointly) of tax free capital gains. If you've kept records of the upgrades then some/all of the $60k should apply towards tax free as well.

And the cash flow isn't great: After management fees (typically about 8% off the TOP), mortgage, taxes and HOA you're looking at about $390/month in income...that can very quickly be eaten up by maintenance (something always happens), vacancy, or any number of other unforeseen events. Just doesn't seem worth holding onto.

I'd agree with this.  If you convert to an investment property then you may lose the opportunity to take gains tax-free.  Plus the real estate market appears to be up now, so probably a good time to sell.   Finally, having been a landlord before, it's not for everyone.  Tenants are a pain and property managers will nickel and dime you to death.  So unless it's close enough for you to drive to manage it and you have enough time and you have enough experience and for some reason you can't take the tax-free gain, then sell is as fast as possible.

[bornInFlorida]

Thank you Usury for your feedback.

[morninglightmountain]

Wow, as someone just now entering the home-buying game, I'm incredibly jealous of your appreciation!  Is the new city in a lower COL area?  If so, I say cash out and realize those gains.  You can use the leftover gains (assuming you buy a cheaper
 new home) to buy a much better cash-flowing investment property, such as a duplex.

[bornInFlorida]

@morninglightmountain

Nothing to be jealous about. Reason I say that is because it has taken 16 years for the appreciation. When I did the ROI, it has been about 3.5% per year return (after considering upgrades, maintenance costs etc.). Jim Collins who write about finance and investing is absolutely correct that home is not a good investment. With respect to your other question, I am buying a bigger home in HCOL area. The decision is not financial driven but is completely driven from a family perspective. My wife wants to raise kids closer to her family.

[GizmoTX]

Sell. You do not want to be a long distance landlord, even if you hire a property manager.

[bornInFlorida]

Sell. You do not want to be a long distance landlord, even if you hire a property manager.

Thank you GizmoTX for your feedback.