Author Topic: Rent my house or sell?  (Read 1639 times)

tracipam

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Rent my house or sell?
« on: September 24, 2016, 08:42:30 AM »

Hey all,

I haven't been on the MMM forums in a million years, what with being busy implementing my personal plan for financial domination.  But now I've come to a crossroads and I'd like some advice. 

For the past four years I've been living in Flyover Metro OH, in a great house that I bought cheap at the bottom of the market.  YAY!  Now my boyfriend's living to ExpensiveTown, California and I'd like to join him.  We've already worked out a pretty sweet rent deal there (since I'm not crazy enough to buy in ExpensiveTown), AND I've worked out a deal with my employer to work remotely, which I'm very in favor of. 

The question is, what to do with my house?  Details posted below, including my personal analysis--but I'm open to face punches if I've forgotten something. 

Original Purchase Price: 100K (in 2012).  I originally bought it with 10% down, fixed 30 yr.
What I think I can rent it for today:  1300-1400 plus utilities (1350 used for my personal analysis)
Estimated Selling Price today:  According to realtor, probably 150-160K

House Description: 2 br, 1.5 ba single family home on a quiet culdesac, in a rapidly appreciating (young professional) neighborhood--they're building a fancypants local microbrewery within a few blocks of my house, and all the cool trendy restaurants are also within walking distance.  In fact, you can walk to everything--library, grocery stores, parks, municipal pool.  I haven't updated much in the house, so no pretty granite countertops or other fancy things.  No garage, etc, but definitely in an easily rentable neighborhood.

Cons are that it's an older house--100 years old, poor insulation, probably higher repairs than a new house would be.  So I've rounded a bit higher on estimated repairs below.  That said, I think it would be fine as long as I don't get absolutely horrible renters. Most of the other houses in the neighborhood are the same.

Costs:
Management costs:  ~$70/month
Insurance and Tax: $245/month
Estimated repairs (1% of purchase, and rounded up for good measure:) ~$100/month

I also currently have a mortgage, which is $675, but that includes the $245 insurance and tax, which are escrowed in... so basically $430 left in monthly costs. 

Not counting water, utilities, etc, as those would be the property of the renter. 

So:  it definitely passes the 1% rule. 

By my calculations, the cap rate is ~10% (assuming 95% occupancy), not counting appreciation.  My total yearly cash flow should be about $5K, subtracting all expenses including the mortgage.  But is it better to go that route or just sell it, pocket the cash and invest in the stock market?

I've been puzzling over this for a few days, and the way I hit upon thinking about this is that if I can make $5000/year from the rental, I'd need to make 25x that, or 125K to have the equivalent 4% spinoff in the markets; so basically, unless my house appreciates to where I can pocket 125K or greater after all selling costs, it makes more sense financially to rent. 

Disclosure:  I already have another house in another city I'm renting from a distance, and I already have someone who I trust to manage it.  AND I'll also be coming back to the neighborhood periodically.  So the concept of renting is not that scary to me.

To all:  what's your analysis?  Am I missing something important here?  Am I thinking about this wrong?  Please let me know your thoughts!! 

Thanks!

Tracy

waltworks

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Re: Rent my house or sell?
« Reply #1 on: September 24, 2016, 03:12:01 PM »
How much is on the mortgage now?

I'd probably keep it and see what happens with the neighborhood in a couple of years.

-W

tracipam

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Re: Rent my house or sell?
« Reply #2 on: September 24, 2016, 06:32:26 PM »

Hi Walt!

Right now I've got 83K left on the mortgage.  I technically could pay it off I suppose, but I kinda like having my money in the stock market. 

I'm leaning the same way you are, thanks for your input!

Tracy

waltworks

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Re: Rent my house or sell?
« Reply #3 on: September 24, 2016, 07:26:02 PM »
Yeah, you've got minimal money stuck in it, then (ok, not "minimal"...)  Keep it, unless it starts making your life stressful/miserable. Long distance landlording can suck even if you have a management company.

In the absence of too much extra stress, keep until you can raise the rents or else sell for a ton.

-W

doug111

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Re: Rent my house or sell?
« Reply #4 on: September 28, 2016, 08:24:12 PM »

Hey all,

I haven't been on the MMM forums in a million years, what with being busy implementing my personal plan for financial domination.  But now I've come to a crossroads and I'd like some advice. 

For the past four years I've been living in Flyover Metro OH, in a great house that I bought cheap at the bottom of the market.  YAY!  Now my boyfriend's living to ExpensiveTown, California and I'd like to join him.  We've already worked out a pretty sweet rent deal there (since I'm not crazy enough to buy in ExpensiveTown), AND I've worked out a deal with my employer to work remotely, which I'm very in favor of. 

The question is, what to do with my house?  Details posted below, including my personal analysis--but I'm open to face punches if I've forgotten something. 

Original Purchase Price: 100K (in 2012).  I originally bought it with 10% down, fixed 30 yr.
What I think I can rent it for today:  1300-1400 plus utilities (1350 used for my personal analysis)
Estimated Selling Price today:  According to realtor, probably 150-160K

House Description: 2 br, 1.5 ba single family home on a quiet culdesac, in a rapidly appreciating (young professional) neighborhood--they're building a fancypants local microbrewery within a few blocks of my house, and all the cool trendy restaurants are also within walking distance.  In fact, you can walk to everything--library, grocery stores, parks, municipal pool.  I haven't updated much in the house, so no pretty granite countertops or other fancy things.  No garage, etc, but definitely in an easily rentable neighborhood.

Cons are that it's an older house--100 years old, poor insulation, probably higher repairs than a new house would be.  So I've rounded a bit higher on estimated repairs below.  That said, I think it would be fine as long as I don't get absolutely horrible renters. Most of the other houses in the neighborhood are the same.

Costs:
Management costs:  ~$70/month
Insurance and Tax: $245/month
Estimated repairs (1% of purchase, and rounded up for good measure:) ~$100/month

I also currently have a mortgage, which is $675, but that includes the $245 insurance and tax, which are escrowed in... so basically $430 left in monthly costs. 

Not counting water, utilities, etc, as those would be the property of the renter. 

So:  it definitely passes the 1% rule. 

By my calculations, the cap rate is ~10% (assuming 95% occupancy), not counting appreciation.  My total yearly cash flow should be about $5K, subtracting all expenses including the mortgage.  But is it better to go that route or just sell it, pocket the cash and invest in the stock market?

I've been puzzling over this for a few days, and the way I hit upon thinking about this is that if I can make $5000/year from the rental, I'd need to make 25x that, or 125K to have the equivalent 4% spinoff in the markets; so basically, unless my house appreciates to where I can pocket 125K or greater after all selling costs, it makes more sense financially to rent. 

Disclosure:  I already have another house in another city I'm renting from a distance, and I already have someone who I trust to manage it.  AND I'll also be coming back to the neighborhood periodically.  So the concept of renting is not that scary to me.

To all:  what's your analysis?  Am I missing something important here?  Am I thinking about this wrong?  Please let me know your thoughts!! 

Thanks!

Tracy
SELL !!!!! SELL !!!! SELL !!!!!  Unless your an eccentric tight wad and find it entertaining when people screw you over and find their animal feces all over your house and you can still oddly love doing it !!!! If your not one of these odd eccentric people called a LANDLORD then forget it !!!! Its a miserable existence and I would strongly say that after the new landlords 1st tenant leaves them a mess they 99% of the time quit anyway and just sell the house !!!! Theres an old saying that LANDLORDS LIVE POOR AND DIE RICH !!!! Thats usually a good 30 years of living like a POOR PERSON !!!!

pudding

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Re: Rent my house or sell?
« Reply #5 on: September 30, 2016, 09:40:23 PM »

Hey all,

I haven't been on the MMM forums in a million years, what with being busy implementing my personal plan for financial domination.  But now I've come to a crossroads and I'd like some advice. 

For the past four years I've been living in Flyover Metro OH, in a great house that I bought cheap at the bottom of the market.  YAY!  Now my boyfriend's living to ExpensiveTown, California and I'd like to join him.  We've already worked out a pretty sweet rent deal there (since I'm not crazy enough to buy in ExpensiveTown), AND I've worked out a deal with my employer to work remotely, which I'm very in favor of. 

The question is, what to do with my house?  Details posted below, including my personal analysis--but I'm open to face punches if I've forgotten something. 

Original Purchase Price: 100K (in 2012).  I originally bought it with 10% down, fixed 30 yr.
What I think I can rent it for today:  1300-1400 plus utilities (1350 used for my personal analysis)
Estimated Selling Price today:  According to realtor, probably 150-160K

House Description: 2 br, 1.5 ba single family home on a quiet culdesac, in a rapidly appreciating (young professional) neighborhood--they're building a fancypants local microbrewery within a few blocks of my house, and all the cool trendy restaurants are also within walking distance.  In fact, you can walk to everything--library, grocery stores, parks, municipal pool.  I haven't updated much in the house, so no pretty granite countertops or other fancy things.  No garage, etc, but definitely in an easily rentable neighborhood.

Cons are that it's an older house--100 years old, poor insulation, probably higher repairs than a new house would be.  So I've rounded a bit higher on estimated repairs below.  That said, I think it would be fine as long as I don't get absolutely horrible renters. Most of the other houses in the neighborhood are the same.

Costs:
Management costs:  ~$70/month
Insurance and Tax: $245/month
Estimated repairs (1% of purchase, and rounded up for good measure:) ~$100/month

I also currently have a mortgage, which is $675, but that includes the $245 insurance and tax, which are escrowed in... so basically $430 left in monthly costs. 

Not counting water, utilities, etc, as those would be the property of the renter. 

So:  it definitely passes the 1% rule. 

By my calculations, the cap rate is ~10% (assuming 95% occupancy), not counting appreciation.  My total yearly cash flow should be about $5K, subtracting all expenses including the mortgage.  But is it better to go that route or just sell it, pocket the cash and invest in the stock market?

I've been puzzling over this for a few days, and the way I hit upon thinking about this is that if I can make $5000/year from the rental, I'd need to make 25x that, or 125K to have the equivalent 4% spinoff in the markets; so basically, unless my house appreciates to where I can pocket 125K or greater after all selling costs, it makes more sense financially to rent. 

Disclosure:  I already have another house in another city I'm renting from a distance, and I already have someone who I trust to manage it.  AND I'll also be coming back to the neighborhood periodically.  So the concept of renting is not that scary to me.

To all:  what's your analysis?  Am I missing something important here?  Am I thinking about this wrong?  Please let me know your thoughts!! 

Thanks!

Tracy
SELL !!!!! SELL !!!! SELL !!!!!  Unless your an eccentric tight wad and find it entertaining when people screw you over and find their animal feces all over your house and you can still oddly love doing it !!!! If your not one of these odd eccentric people called a LANDLORD then forget it !!!! Its a miserable existence and I would strongly say that after the new landlords 1st tenant leaves them a mess they 99% of the time quit anyway and just sell the house !!!! Theres an old saying that LANDLORDS LIVE POOR AND DIE RICH !!!! Thats usually a good 30 years of living like a POOR PERSON !!!!

Hi Tracy, it is the Real Estate and Landlording section and the OP said she already has a house and is a long distance landlord.

waltworks

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Re: Rent my house or sell?
« Reply #6 on: September 30, 2016, 10:00:29 PM »
Doug111 is in the habit of trolling threads with this kind of stuff. Just ignore him/it.

-W

pudding

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Re: Rent my house or sell?
« Reply #7 on: September 30, 2016, 10:20:31 PM »
Im in a similar situation. I have a house and I have a ton of equity in it, probably around 700 to 750k.   

I think about selling it, but I'm convinced its going up more as just up the street they're building a 6 story building and I think they'll re zone the area mine is in. To be honest it's become a bit of a nuisance in as much as it consumes my thinking way too much of the time.

I almost sold it at one point when I had about 60k in equity....