Author Topic: Should we sell or keep renting?  (Read 2693 times)

FinanciallyIndependent

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Should we sell or keep renting?
« on: January 11, 2016, 10:39:10 AM »


We purchased a house back in 2009 in TX- Originally we had a 30 yr mortgage at 4% but in 2012 we refinanced to a 15 yr with 2.75% apr. We lived in the house from 2009 to 2014. Once I went back to work the commute was 45 mins each way for me & 2 kids (under 3) and DH had a 1 hr commute each way. We decided to rent the house and move into an apartment 2 mins from my work & 15 mins from DH. We are loving it and donít plan on going back. We rented the house within a month of moving out with the help of real estate agent who charged us 1 months rent for finding a tenant. The lease will be up in a few months & the tenant will be moving out due to personal reasons. The rent is 2200$ and the area has really good schools, but the property taxes are ridiculous. With the oil prices tanking we feel the real estate prices in TX might tank. We are considering selling it if the numbers below donít look too profitable.

Market Value: 270,000
Original Purchase price: 200000 (Yr- 2009)
Original Mortgage Amount: 160000
Interest Rate: 2.75% (Refinanced from 30 yr to 15 yr loan in Aug 2012)
Mortgage Term: 15
Term remaining: 12
Amount remaining on mortgage: 125000
Gross Rents: 2200
Principal and Interest (the P&I of your PITI - should match with the above info): 1057
Taxes and Insurance (the T&I of your PITI): 8500
HOA costs:850

What do you all think? Is it worth holding on to or selling?

nereo

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Re: Should we sell or keep renting?
« Reply #1 on: January 11, 2016, 11:16:00 AM »


We purchased a house back in 2009 in TX- Originally we had a 30 yr mortgage at 4% but in 2012 we refinanced to a 15 yr with 2.75% apr. We lived in the house from 2009 to 2014. Once I went back to work the commute was 45 mins each way for me & 2 kids (under 3) and DH had a 1 hr commute each way. We decided to rent the house and move into an apartment 2 mins from my work & 15 mins from DH. We are loving it and donít plan on going back. We rented the house within a month of moving out with the help of real estate agent who charged us 1 months rent for finding a tenant. The lease will be up in a few months & the tenant will be moving out due to personal reasons. The rent is 2200$ and the area has really good schools, but the property taxes are ridiculous. With the oil prices tanking we feel the real estate prices in TX might tank. We are considering selling it if the numbers below donít look too profitable.

Market Value: 270,000
Original Purchase price: 200000 (Yr- 2009)
Original Mortgage Amount: 160000
Interest Rate: 2.75% (Refinanced from 30 yr to 15 yr loan in Aug 2012)
Mortgage Term: 15
Term remaining: 12
Amount remaining on mortgage: 125000
Gross Rents: 2200
Principal and Interest (the P&I of your PITI - should match with the above info): 1057
Taxes and Insurance (the T&I of your PITI): 8500
HOA costs:850

What do you all think? Is it worth holding on to or selling?

I'd advise making your decision solely based on whats best going forward, not on what you paid for it.  You have no plans on going back so that makes the decision easier.

Currently you are receiving $2200/mo from tenants
You are paying out ~$1800/mo in PITA + HOA.  This doesn't include vacancies and operating expenses.

Personally I don't think this property is a great investment for you.  Unless you can raise the rent on the next tenants I would sell.  Bonus: you could get $150k in equity by selling.

norabird

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Re: Should we sell or keep renting?
« Reply #2 on: January 12, 2016, 09:48:52 AM »
I'd sell and keep renting since you like your current arrangement. You'll make a profit, can reinvest the money, and stay in the current place while it keeps working for you.

GoatStache

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Re: Should we sell or keep renting?
« Reply #3 on: January 12, 2016, 11:05:23 AM »
To be clear that's 850 a month in HOA fees? Or is that annually?


If it's 850 I would ask current tenant if theyre interested in doing a lease with an option to buy.. (Save on Realtor fees.)

That 850/mo HOA fee will likely scare off an investor so youll likely have to sell it vacant.

FinanciallyIndependent

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Re: Should we sell or keep renting?
« Reply #4 on: January 12, 2016, 12:39:04 PM »
HOA is 850$/yr..... Our current renters are moving out of the area. So we just need to decide whether we keep renting or sell it. I like the aspect of keeping it as a rental, since its kind of a diversification. But not at the risk of loosing money while renting it. Its barely a break even investment since like nereo mentioned our PITI is 1800$ a month not considering any vacancies or operating cost. And we are kind of left with 2000$/month after deducting 2200$ one time fee charged by realtor.


So the cash flow isnt amazing but its also not like we are pouring in money every month (atleast not until its vacant). So just wanted to get your thoughts on this as an investment property DH is almost convinced that selling would be the best move.
« Last Edit: January 12, 2016, 01:05:18 PM by FinanciallyIndependent »

adamcollin

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Re: Should we sell or keep renting?
« Reply #5 on: January 13, 2016, 02:02:44 AM »
Since you like the present arrangement, you should continue renting the house.

Another Reader

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Re: Should we sell or keep renting?
« Reply #6 on: January 13, 2016, 03:10:09 AM »
"We are considering selling it if the numbers below don’t look too profitable. "

This appears to be a poor investment.  It's cash flow negative after you allow for vacancy and collection loss, property management, repairs and maintenance and capital improvements.  The appreciation prospects in your opinion are poor.  In your shoes, I would sell.

You can build a portfolio of real estate by buying a series of owner-occupied properties over time.  The key to making this work is positive cash flow.  In your case, you are an accidental landlord, not an investor with an investment plan.
« Last Edit: January 13, 2016, 08:29:02 AM by Another Reader »

nereo

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Re: Should we sell or keep renting?
« Reply #7 on: January 13, 2016, 05:57:45 AM »
Since you like the present arrangement, you should continue renting the house.
Did you read the OP?

Quote
We are considering selling it if the numbers below donít look too profitable.
Quote
DH is almost convinced that selling would be the best move.

zephyr911

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Re: Should we sell or keep renting?
« Reply #8 on: January 13, 2016, 07:30:09 AM »
The 15-year term makes this look like a worse deal than it really is by increasing the spread between the cash return and the total return. Even at net-zero cash flow you're building almost $10K a year in equity (and rising over time). If you pay it off on schedule using only your tenants' money, that's $120K in 12 years. If we assume no cash flow and no appreciation, that's a total return of 80%, which equates to 5% compounded annually.

It'd be enough to hold onto if you had good long-term prospects for appreciation and continued quality tenants; however, as you've mentioned, there's a real potential downside in the regional economic uncertainty. Your high tax bill could get even worse, if area values tank and rates are increased to preserve revenue, and just one major repair or improvement could nuke a whole year's returns in a heartbeat. If it were mine, I'd probably sell and buy multifamilies, but even your average ETF should beat this return in the long run. Your call. :)

FinanciallyIndependent

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Re: Should we sell or keep renting?
« Reply #9 on: January 13, 2016, 07:53:18 AM »
Thank you everyone for your input...its really helpful to get your perspective on this. I think we will be selling this home soon. Is it worth the headache to sell it on our own to save 3% on real estate agent fee, if so how do we go about listing it & showing it. Sorry if this has been discussed on another thread couldn't find anything while searching.

zephyr911

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Re: Should we sell or keep renting?
« Reply #10 on: January 13, 2016, 10:18:04 AM »
As a licensed agent myself, I will say... it depends. ;)

A good agent will earn their commission by leveraging their marketing tools into a higher selling price and a faster sale, maybe. A bad one will just try to sell quick (low) because a fraction of the effort for 90% of the commission is still a great deal to them, never mind the loss to you. And it takes a while to figure out which kind you're talking to.

Plenty of people have saved themselves real money by going FSBO. However, around 80% who try end up getting an agent later because they can't get what they wanted or they get tired of dealing with showings, etc. It really depends on how much time you have to learn.