The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: smb232 on January 21, 2019, 09:54:02 AM
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We currently own a SFH that we have been living in for ~2 years (it's in a suburban community with no walkability). Given our desire to live more cheaply and near to public transport (to get rid of a car), we are considering selling the house or converting it to a rental. We want to move back into one of the units in a 2-flat that we own in a walkable area nearby.
I'm trying to figure out if we should sell and pay the costs of selling (~8-10 percent is standard by us) or convert to a rental for a while and hope the property continues to appreciate with inflation. Details below
Purchase price - $277,000 (we paid less than the market at the time due to it not being officially listed) We put 5 percent down on a mortgage at 4.75% interest. It’s not very old and maintenance issues have been none so far.
Likely current sales price - $285,000 (the market has not been doing well given some issues with the schools that are currently being fixed, but houses until $300K sell better since the average home price in the town is $500K)
Anticipated Rent = $2200/month
Gross Rental Income = $24,200/year
Operating expenses = $10,500/year
Net operating Income = $13,700/year
Cash flow = $-2800/year
New equity in home ~$4500/year
So, should I sell and get out now or should I rent for a couple years to recoup some of the fees associated with selling. I expect it will break each year and we only have 13K into the house at this point.
Any insights appreciated.
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I would sell. There's no reason to feed the alligator hoping for a non-zero return in the future along with the headaches of being a landlord.
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Sell. There's no way I'd accept $2,200 in rent and ~-$200 negative cash flow if I could have money in hand. You might have no maintenence issues now, but you will in a few years, almost certainly. Sell sell sell.
ETA: Having lived there the previous 2 years you won't even pay capitol gains if you sell it soon. Yet another reason to sell.
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Sell sell sell.
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Another vote for sell. There is not much to gain and a lot potentially to lose here by renting.
-W