Should I sell my rental property ?

[Think]

I have an unprofitable rental property I'm trying to decide what to do about. Turns out the current tenant may be interested in purchasing the property but I would only early approx 10k at closing.

Here are the numbers:

Piti, hoa and management fee: 1,666
Rental income: 1,350

So I'm losing approx 300 a month by having this rental. At the same time, I'm paying down approx 300 of equity a month, which will increase over time. I have a 30 year fixed rate mortgage at a 3.5 percent rate.

Other thing to consider are obviously repairs and my current tenant possibly moving out. The condo is in a popular area and last time rented within one week. I'm not worried about the unit being vacant for more than one month. I am worried about repairs. I had approx 2k in repairs last year and assume a similar amount in the coming years.

Would you sell this property and take the 10k and invest it in an index fund?

Originally our plan was to have this property paid off in our 50s and have it be an annuity in old age.  We are not as concerned about the cash flow now.  I don't want to retire before 50 because that's when my pension kicks in and it's worth the wait!  We figured someone else is basically paying the mortgage. Also, my rent is a little bit low and my property manager said I can increase is by 100-150 a month.

Will I regret it if in ten years the rental nets 250 a month and is also paying off 400 a month in equity? Other things to consider are that we own another rental property (profitable) that I will most likely inherit one or two properties in the next 20 years.

I appreciate any advice.


For some context here is what we are saving on an annual basis:

55K 401ks including matching
30k deferred comp stock
16k defined pension (if I leave before retirement age rolls over to 401k)
20k principle paydown on primary residence (in addition to paydown from mortgage approx 10k a yr)
10k emergency fund

[arebelspy]

I'd sell that as fast as I could, personally.

Do you anticipate massive appreciation soon or something?

[Think]

I'd sell that as fast as I could, personally.

Do you anticipate massive appreciation soon or something?

No.  The condo has been appreciating but I don't expect massive appreciation anytime soon.

[zephyr911]

I second ARS' recommendation. Rental equity should earn positive cash flow, and yours doe not. Any repairs will only deepen the loss. Put that money to work elsewhere.
The next rental I put $10k down on will be earning $2-300/mo even after PITI+maintenance.

[Think]

I second ARS' recommendation. Rental equity should earn positive cash flow, and yours doe not. Any repairs will only deepen the loss. Put that money to work elsewhere.
The next rental I put $10k down on will be earning $2-300/mo even after PITI+maintenance.

Thanks.  I'm leaning this way.  I did some calculations today assuming I invest the 10-20k in index funds vs continue to rent out the unit.  I made sure to be conservative in assuming increase in rent, repairs, one month vacant a year, 2 percent appreciation a year, etc.  I was surprised to see that it came out about even in year 24 (payoff of mortgage).  However, I assumed 2 percent appreciation a year for the index fund. Maybe that's why? 

[arebelspy]

However, I assumed 2 percent appreciation a year for the index fund. Maybe that's why?

Now try it with numbers more in line with the long term growth of the market 7% real/10-12% nominal.  ;)

[adamcollin]

I think selling your property can prove to be profitable for you.