How to deal with long distance rental property?

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newbie28
Posts: 7
Joined: Fri Dec 25, 2015 1:08 am

How to deal with long distance rental property?

Post by newbie28 »

I have an out of state rental property (It became a rental due to job transfer a few years ago). It has been giving me a lot of headaches of managing this property. I am considering the following options.
1) Sell it (Issue: Need to pay a lot tax due to cap-gain)
2) Look for a reliable property manager (Issue: This turns out to be very difficult of finding a decent PM)
3) 1031 exchage with one that is close to where I live (Issue: California real estate is crazy high and not a good place for investment property).

What would you do in this situation?

Thanks in advance for any suggestions.
NewMoneyMustBeSmart
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Location: Midwest

Re: How to deal with long distance rental property?

Post by NewMoneyMustBeSmart »

I'd sell it; take the hit, and move on.
-- | Few are those who see with their own eyes and feel with their own hearts - Einstein
Rwsavory
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Joined: Mon Mar 07, 2016 8:17 pm

Re: How to deal with long distance rental property?

Post by Rwsavory »

I would sell it unless you can find a reliable PM. They exist, but even the best ones are not a good substitute for owner management of a single property. Capital gain? Congratulations! :beer
Last edited by Rwsavory on Thu Sep 17, 2020 5:11 pm, edited 2 times in total.
rich126
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Re: How to deal with long distance rental property?

Post by rich126 »

I had a rental property (SFH) for nearly 9 years w/o any issues. I had an excellent property manager. After the first renter occupied the house it was vacant maybe a month or so over the rest of the time.

And literally, I did not enter the house one time in those years. I would frequently visit AZ and once in a while drive past the house but never went into it. When I finally did (last year) I was very surprised how good the house held up and beyond paint and flooring there weren't any major issues.

Obviously the key is to find that property manager and I was fortunate. (I was ~2,000 miles away.)
adamthesmythe
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Re: How to deal with long distance rental property?

Post by adamthesmythe »

If you sell and owe capital gains tax, it's because YOU HAVE A CAPITAL GAIN. Even after taxes you have more money than you had before. You seem to be viewing the gain before taxes as money that you have and now have to give part away. Not so, you never had it. (Unless...you could have sold immediately upon moving...but that train has left the station.)

Thinking about it this way, the only question is whether you can make more money by finding a good (and presumably expensive) manager.
illumination
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Re: How to deal with long distance rental property?

Post by illumination »

I'd also vote to sell it, especially since you clearly don't like being a landlord. Keeping it longer with a property manager will likely mean just a bigger capital tax gain and make an even bigger tax.

It really seems like to me the most miserable owners of rental properties are the ones that own like a single property. The ones that own several seem to embrace it more. I would say my unscientific poll is about 90% of people I know regret buying a rental property. I owned a single property, and while it did great financially, the difference in performance between that and something like an index fund was just not worth the hassle in my opinion.

I would just be careful with a 1031 exchange that you don't jump into a real estate investment you then also want to get out of. Paying a capital gains tax is not the end of the world, you might be way happier with that money in an index fund and something more passive.
Last edited by illumination on Thu Sep 17, 2020 5:21 pm, edited 1 time in total.
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Brianmcg321
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Re: How to deal with long distance rental property?

Post by Brianmcg321 »

Sell it.
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Pegasus_RPG
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Re: How to deal with long distance rental property?

Post by Pegasus_RPG »

I have long distance rental property and a good PM is definitely the way to go if you plan to keep the property. Most charge anywhere from 6-10% of the monthly rent, some with a placement fee of 25-35%. Just make sure the market can support a rent rate that covers all of your expenses including the PM's fees (assume annual turnover so factor in one placement fee per year,) mortgage, insurance, property taxes and an allowance for the inevitable repairs. Then even if your profit is just a couple hundred bucks a year right now, you can hold the property indefinitely "for free" so when the mortgage is paid off in less than 30 years, you'll have a nice retirement cash flow from the property plus a (hopefully) appreciated asset you could sell or borrow against later if you had to.
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unclescrooge
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Re: How to deal with long distance rental property?

Post by unclescrooge »

newbie28 wrote: Thu Sep 17, 2020 4:56 pm I have an out of state rental property (It became a rental due to job transfer a few years ago). It has been giving me a lot of headaches of managing this property. I am considering the following options.
1) Sell it (Issue: Need to pay a lot tax due to cap-gain)
2) Look for a reliable property manager (Issue: This turns out to be very difficult of finding a decent PM)
3) 1031 exchage with one that is close to where I live (Issue: California real estate is crazy high and not a good place for investment property).

What would you do in this situation?

Thanks in advance for any suggestions.
I bought 2 rentals properties 2500 miles from home in 2005 in a state I've still never been to.

The first few years I went through multiple prop. managers until I found one who was competent and honest. Past 10 years with them has been relatively hassle-free.

Like dating, you'll have to kiss a bunch of toads before your find your prince or princess.

I would not 1031 in california at this time.
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AlabamaPaul
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Re: How to deal with long distance rental property?

Post by AlabamaPaul »

How many years ago did you get transferred?
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Sandtrap
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Re: How to deal with long distance rental property?

Post by Sandtrap »

Sell if you do not want to be a landlord. (sounds like you do not)

1031 exchange if you want to be a landlord.

If you can find a decent prop mgt company or licensed agent/etc, do you want to keep the property?
(sounds like you do not want to do this and are "done with it". . . true?

Do you want to own and be responsible for rental property and tenants no matter if a prop mgt company or self managed?

j :happy
Last edited by Sandtrap on Thu Sep 17, 2020 6:05 pm, edited 2 times in total.
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123
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Re: How to deal with long distance rental property?

Post by 123 »

Sell.
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calvin111
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Re: How to deal with long distance rental property?

Post by calvin111 »

NewMoneyMustBeSmart wrote: Thu Sep 17, 2020 4:58 pm I'd sell it; take the hit, and move on.
I did the same. Moved from NJ and sold the house in NJ. It was not worth keeping as it was hardly break even with rent, property tax, HOA, maintenance. Didnt want to deal with someone calling my midnight saying that heater stopped working.

Feeling much more peace in life.
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Watty
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Re: How to deal with long distance rental property?

Post by Watty »

adamthesmythe wrote: Thu Sep 17, 2020 5:11 pm If you sell and owe capital gains tax, it's because YOU HAVE A CAPITAL GAIN. Even after taxes you have more money than you had before.
+1

Sell it.

One thing that has not been mentioned is the last I heard the eviction moratorium was still in place and some cities and states may also have their own. Now may not be a good time to be a landlord.

Most housing markets are also real stonge right now so that it may be fairly easy to sell it when the current lease is up. If you keep it for a few more years then change your mind and sell it then you could end up trying to sell it in a bad housing market. That could be difficult to do and expensive if the property is sitting empty for six months or longer while it is listed for sale.
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