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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: BJacks on October 10, 2018, 10:16:03 AM

Title: Sell or Rent
Post by: BJacks on October 10, 2018, 10:16:03 AM
We have a former rental that were trying to figure out if we should sell or re-rent out. We just sunk 30k into this place because the previous tenants wrecked it down to the studs in some places. we updated it a lot and it's basically a brand new house.


we owe 142k on the house. it's about two years into a 15 year mortgage. The house is worth about 299k and we should now be able to rent it out for about 1800 minus fees for a property manager which bring it down to a take home of $1650 (my husband is no longer willing to do this himself as of now due to last awful tenant). What makes the most sense?
Title: Re: Sell or Rent
Post by: waltworks on October 11, 2018, 05:52:14 PM
P&I alone will be 1000+ bucks a month. Put taxes and insurance, plus maintenance in there and you're down into negligible income or a loss from the place. You already know what can go wrong.

Sell it immediately.

Title: Re: Sell or Rent
Post by: Papa bear on October 11, 2018, 05:56:26 PM
A 300k house that rents for 1800 isn’t worth it for a rental. You made your money on appreciation, not on the rents.

Sell this. It’s not a rental. Congrats on making money on the place for selling it.

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Title: Re: Sell or Rent
Post by: Papa bear on October 11, 2018, 06:01:47 PM
Oh, to add, unless this isn’t worth 300. If it’s worth 220? Then, having been fully updated, it’s probably a not so good not so bad rental. Maintenance should be lower than other similar rentals going forward after 30k in capital improvements.

Why don’t you get a realtor to see what they might list it for? 

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Title: Re: Sell or Rent
Post by: Jon Bon on October 12, 2018, 08:20:49 AM
100% sell. Does not even come close to the 1% rule. Meaning this place needs to rent for $3,000 a month for it to be worth while. You just spent 30k dealing with nightmare tenants, and you want to sign up for more of that for a terrible return? SELL.

Speaking of return. The payment is around $1,000 a month plus another 300 a month in taxes.  So 1300 a month in expenses and 1650 a month in revenues assuming NOTHING EVER GOES WRONG. so you are making 350 a month or 4200 a year. Again assuming nothing ever goes wrong. A roof or a furnace repair would wipe you out for an entire year.

 4200/150,000 in equity = 2.8% return.

Me thinks your money might be earning more somewhere else. Heck even risk free TIPS pay more than that.

Title: Re: Sell or Rent
Post by: Papa bear on October 12, 2018, 08:25:15 AM
You can avoid some, if not all realtor costs by listing for sale by owner.

You can defer, most, if not all taxes, with a like kind exchange (section 1031) into other, more profitable rentals.

So: A 300k house that only rents at 1800 is not a good rental. It’s not worth 300 to an investor. It might be worth 300 as a single family home that is great for someone to live in. 

If you are real estate investor, this is not a good rental. If you are a consumer of a house, then this might be a great deal for the area.

Pick what you are. 

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Title: Re: Sell or Rent
Post by: waltworks on October 12, 2018, 11:56:41 AM
If they have a ~3% interest rate, a 15 year loan, and are 2 years in with a $142k balance, their starting balance was about $160k. Their monthly P&I payment is about $1100. It's possible that their rate is a little higher or *maybe* a tiny bit lower, but not enough to move the dial much. I was actually being very conservative when I said $1000 to account for that.

Again, this is a terrible rental. There is really no getting around that. The $30k in damages they just had to fix demonstrates the dangers of buying "investment" properties that don't cash flow quite well, too.


She said they are two years into a 15 year loan and owe 142,000.  That is not a $1,000 payment for principle and interest.

It is also false to imagine the rent as return against what you believe the property may be worth today. 

She needs to calculate what they would actually get for the property after selling it (less real estate commissions) along with taxes.  Less taxes and cost of selling, that is the number you should calculate your rent return against to determine whether the money will get you better returns somewhere else.
Title: Re: Sell or Rent
Post by: mpg350 on October 12, 2018, 01:45:10 PM
I would sell it...seems like not enough rent for the price of the house.