Sell or Keep the rental?

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beingzero
Posts: 4
Joined: Wed Dec 14, 2016 10:46 am

Sell or Keep the rental?

Post by beingzero » Tue Dec 27, 2016 11:47 am

Hi All,

Long time lurker but this is my first post. Need help figuring out to sell or keep a rental we own in a different state:

Original Purchase Price: 195K
Current Loan Balance: 160K
Current Interest rate: 4.05 %
Current Estimated Property Value: 250K
Monthly Mortgage Payment: 1007
Monthly HOA Payment: 175
Monthly Rent: 1750
Property Management Fees: 175
Cash Flow: 393

The property is an excellent school district which I have been renting out for the last 3 years and has never been on the market more than week before getting rented.

Should I keep renting it out/Sell it (anyway to avoid the tax hit)/tap into the equity to buy another rental or a primary residence?

I currently live in a different state and kind of screwed up not buying the house in 2013. Now the prices are up significantly and I am worried buying at the current price levels. So renting at a pretty decent rental rate.

Thank You.

Compound
Posts: 617
Joined: Mon May 26, 2014 1:32 pm

Re: Sell or Keep the rental?

Post by Compound » Tue Dec 27, 2016 9:17 pm

Why would you sell it? You're cash flow positive and I'd like to think it's relatively easy to deal with (I.e. Not a headache) since you have a property manager.

stevekozak2
Posts: 40
Joined: Sun Dec 25, 2016 12:38 pm

Re: Sell or Keep the rental?

Post by stevekozak2 » Wed Dec 28, 2016 6:24 am

I would probabley sell it and save on top of the profit to buy another rental locally, for cash (if you like landlording). Long distance landlording is fraught with peril.

TRC
Posts: 1896
Joined: Sat Dec 20, 2008 5:38 pm

Re: Sell or Keep the rental?

Post by TRC » Wed Dec 28, 2016 8:03 am

beingzero wrote:...Need help figuring out to sell or keep a rental we own in a different state:
For me, I would never own a rental that I could not easily get to.

cherijoh
Posts: 4989
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Sell or Keep the rental?

Post by cherijoh » Wed Dec 28, 2016 8:07 am

beingzero wrote:Hi All,

Long time lurker but this is my first post. Need help figuring out to sell or keep a rental we own in a different state:

Original Purchase Price: 195K
Current Loan Balance: 160K
Current Interest rate: 4.05 %
Current Estimated Property Value: 250K
Monthly Mortgage Payment: 1007
Monthly HOA Payment: 175
Monthly Rent: 1750
Property Management Fees: 175
Cash Flow: 393

The property is an excellent school district which I have been renting out for the last 3 years and has never been on the market more than week before getting rented.

Should I keep renting it out/Sell it (anyway to avoid the tax hit)/tap into the equity to buy another rental or a primary residence?

I currently live in a different state and kind of screwed up not buying the house in 2013. Now the prices are up significantly and I am worried buying at the current price levels. So renting at a pretty decent rental rate.

Thank You.
How much is your home equity as a percentage of your net worth? This is not a decision that can be made in isolation strictly on a cash flow basis.

It doesn't make sense to me to buy a rental house in your new locale and continue to rent for your family. Nor does it make sense to tap the equity in your rental property to buy a primary residence. If that is the only way you can afford to buy a house, then IMO you can only afford one house, not two. Do you have any intention of returning to the state where your current rental is located? If not, I'd sell the rental - you are losing 10% of your rent to property management fees. That is a huge drag.

Does your monthly mortgage payment include taxes and insurance? (If not, your cash flow numbers are off).

EHoops
Posts: 156
Joined: Sun Jun 01, 2008 9:42 am

Re: Sell or Keep the rental?

Post by EHoops » Wed Dec 28, 2016 8:51 am

I would keep the rental since it sounds as though it's going well. In addition to the cash flow and the appreciation of the property value, you are hopefully capturing the 3.63% tax depreciation each year (if you aren't the IRS will treat you as though you have been when you sell it).

I have found owning rentals to be relatively easy, aside from a few days each year, and a great financial boon.

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