My husband an I currently live in a 2/2.5 townhouse. We bought it 3.5 years ago with the idea in mind that in a few years we would buy a SFH home for ourselves and rent our townhouse. Earlier this year we bought a SFH as rental in a nearby city but they are pricey-pants in the city where we live, so here we bought a less expensive townhouse with idea for it to become rental #2 when we were ready.
Now the problem is, when we bought the townhouse we were just starting to look at REI more seriously and did not really know what made a good rental so we did not make a great choice. Now I am wondering if we should bother renting it or sell it? We are 18-24 months from making this decision, so hopefully either the housing or rental markets will move in our favor in the meantime.
Some napkin math for each option below.
Rental Option:
PITI: 780/mo (we owe 115k on the house at 4.125%)
Rent: 1100/mo (this is realistic for the current market but on the high side. There are some smaller floor plan 2/2s in the community that are currently listed for 900-1100, this is the slow season and ours is larger but still 2 bed)
Vacancy: 65/mo (5%)
Maint: 65/mo (5%)
HOA: 209/mo
cash flow: $1/mo
The maintenance figure is a little low but that is because we have an HOA that does all of the exterior maintenance, roof, siding, lawn care etc. Since I've owned the house, we've definitely spent less than this. The vacancy is also a little low but the area is highly desirable by grad students (dental, medical and law) because it's very convenient to the university. In talking to some landlords who have properties in the area, they have all said their rentals are snapped up immediately and people usually stay at least 3 years until they graduate.
I should have also included some money for my time to manage but I'm already losing money. Possibly, in the peak rent season in 18 months, I could rent it for 1150 or 1200. I have seen units like mine listed as high as 1275 peak season (who knows if that rented, I was skeptical).
Sales option:
Original purchase: 147K (149k - 2k concessions)
Current market: ~150k (Similar properties listed for this now, so it two years I could probably list higher and actually sell for this)
6% commission on sale: -9k
Current loan: 115k
Net: 26,000
This figure is around what my down payment was, so I basically paid the bank rent for 3 years which doesn't make me happy.
Looking at the math, what would you do? I am leaning toward keeping the house as a break-even, slightly negative rental because the rental market here is reliable and I believe the appreciation will come, eventually. If I could go back in time, I'd buy one of the smaller 2 bedroom units because they seem to sell for much less and rent for the same amount. Hindsight is 20/20 though.
I would love to hear your thoughts!