Rental Property - Keep, sell or refinance

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Cobra Commander
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Rental Property - Keep, sell or refinance

Post by Cobra Commander » Thu Aug 09, 2018 11:57 am

Purchase Year: 2006
Purchase Price: $185K (about $40K downpayment)
Ownership: 50/50 with former law school classmate - we get along well
Mortgage: $145K - 30 year ARM (adjusting upwards from 4% to 5% this year)
Current rent: $1,150 per month (about half is from Section 8 voucher)
PITI: $934 (with the interest rate increase)
HOA: About $125 per month (covers all exterior maintenance, lawn, roof, siding, etc.) and goes up about $5-$10 each year
Loan balance: $108K
Value: $168K based upon a recent comp but it would take between $5K to $10K of repairs to sell (new floors and painting). Property values have been rising somewhat (last year the comps were in the 150s).
HHI: About $250K
Age: 36 (me), 33 (DW). We have one 18 m/o and a newborn coming soon

As noted above, I currently co-own 50% of a townhouse with a former law school classmate and I am wondering whether I should keep, sell or refinance the house. I lived in the house during law school and became an accidental landlord when I graduated due to the housing crash because we weren't willing to stomach the loss at that point. It's odd but we have had the same family living there the entire time we rented (first the mother, she was a terrible tenant and then she moved out and her kids assumed the Section 8 voucher) so on the bright side the house has been consistently rented. As noted, I am familiar with the risk factors and irritation of a terrible tenant and the destruction they can cause. Her children have turned out to be great tenants and although they sometimes pay some of the rent a week late they always communicate with me (i.e. they tell me they will have the rest of the rent by Friday and they follow through).

I question whether it is worth it to keep this property. To the extent I do keep it, it probably makes sense to refinance into some form of a fixed rate mortgage. Rates I am seeing now for investment properties are around 5.375 for no points and higher/lower options based upon the amount of points one pays.

The biggest risk factor I see is a non-paying tenant and the costs of evicting this tenant because I live 2.5 hours away. Other risks are that I have to pay for all maintenance because we live too far away to do it in addition to the minor inconvenience of scheduling maintenance. Generally the tenants are home when workers come so no issues there.

It just seems like the rate of return is fairly low for the risk factors involved. The rent barely covers the mortgage payment although about $340 in principal is being repaid so there is some return plus appreciation. I am also not totally sure if they are paying market rent and am not sure how we would find out as there are very few properties listed for rent in the area.

To the extent my partner is willing to buy me out I was thinking we would take the comp which is the exact same townhouse we have and then subtract from it the costs of new flooring since our floors are destroyed. Does that make sense and does that seem fair to you guys? Alternatively, should I hold on to the townhouse?

Happy to answer any questions and provide any additional information.

daheld
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Re: Rental Property - Keep, sell or refinance

Post by daheld » Thu Aug 09, 2018 2:30 pm

So basically the place is worth roughly $15-20k less than what you paid for it 12 years ago? I assume you're making decent money and this is not going to break you either way.

If you do decide to remain in the rental partnership, I would absolutely refi to a fixed rate loan. I would also get some type of market analysis completed to figure out what kind of rent you should be charging. You might be missing out on a decent chunk of money.

It sounds as though you're not really interested in "staying in", and I would agree the potential benefits are pretty measly compared to the potential risks. Again, making assumptions here, but I am going to guess that your income level is such that taking on the hassle and risk of being a landlord isn't really worth it.

renue74
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Re: Rental Property - Keep, sell or refinance

Post by renue74 » Thu Aug 09, 2018 3:07 pm

Property is not cash flowing and it looks like appreciation is not that great either.

https://docs.google.com/spreadsheets/d/ ... sp=sharing

I would sell the property. I would only have rental property that cash flowed.

riverguy
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Re: Rental Property - Keep, sell or refinance

Post by riverguy » Thu Aug 09, 2018 3:08 pm

Seems like a terrible rental. Sell.

megabad
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Re: Rental Property - Keep, sell or refinance

Post by megabad » Thu Aug 09, 2018 3:46 pm

I am seeing interest rates under 5% for investments at excellent credit, but it doesn't really matter as I agree with the above. A section 8 condo with almost no positive cashflow is a great candidate for sale. Dump it and move in. Find a rental closer by with better cashflow if you desire. At these returns, I would strongly prefer a bank CD and I am a pretty devoted real estate investor.

tesuzuki2002
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Re: Rental Property - Keep, sell or refinance

Post by tesuzuki2002 » Thu Aug 09, 2018 4:10 pm

Cobra Commander wrote:
Thu Aug 09, 2018 11:57 am
Purchase Year: 2006
Purchase Price: $185K (about $40K downpayment)
Ownership: 50/50 with former law school classmate - we get along well
Mortgage: $145K - 30 year ARM (adjusting upwards from 4% to 5% this year)
Current rent: $1,150 per month (about half is from Section 8 voucher)
PITI: $934 (with the interest rate increase)
HOA: About $125 per month (covers all exterior maintenance, lawn, roof, siding, etc.) and goes up about $5-$10 each year
Loan balance: $108K
Value: $168K based upon a recent comp but it would take between $5K to $10K of repairs to sell (new floors and painting). Property values have been rising somewhat (last year the comps were in the 150s).
HHI: About $250K
Age: 36 (me), 33 (DW). We have one 18 m/o and a newborn coming soon

As noted above, I currently co-own 50% of a townhouse with a former law school classmate and I am wondering whether I should keep, sell or refinance the house. I lived in the house during law school and became an accidental landlord when I graduated due to the housing crash because we weren't willing to stomach the loss at that point. It's odd but we have had the same family living there the entire time we rented (first the mother, she was a terrible tenant and then she moved out and her kids assumed the Section 8 voucher) so on the bright side the house has been consistently rented. As noted, I am familiar with the risk factors and irritation of a terrible tenant and the destruction they can cause. Her children have turned out to be great tenants and although they sometimes pay some of the rent a week late they always communicate with me (i.e. they tell me they will have the rest of the rent by Friday and they follow through).

I question whether it is worth it to keep this property. To the extent I do keep it, it probably makes sense to refinance into some form of a fixed rate mortgage. Rates I am seeing now for investment properties are around 5.375 for no points and higher/lower options based upon the amount of points one pays.

The biggest risk factor I see is a non-paying tenant and the costs of evicting this tenant because I live 2.5 hours away. Other risks are that I have to pay for all maintenance because we live too far away to do it in addition to the minor inconvenience of scheduling maintenance. Generally the tenants are home when workers come so no issues there.

It just seems like the rate of return is fairly low for the risk factors involved. The rent barely covers the mortgage payment although about $340 in principal is being repaid so there is some return plus appreciation. I am also not totally sure if they are paying market rent and am not sure how we would find out as there are very few properties listed for rent in the area.

To the extent my partner is willing to buy me out I was thinking we would take the comp which is the exact same townhouse we have and then subtract from it the costs of new flooring since our floors are destroyed. Does that make sense and does that seem fair to you guys? Alternatively, should I hold on to the townhouse?

Happy to answer any questions and provide any additional information.

Where is this located ??

We have some similarities.. I bought my rental in 2006 for $159K, Current comps are $210K

I will have the mortgage paid off this year. I've been cash flowing about $400 a month. However, the mortgage being paid that is going to jump to around $1200. I'm long distance. CA to MI. Can't decide if I should sell and cash out and invest my $200K elsewhere or stick with it.

Nate79
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Location: Portland, OR

Re: Rental Property - Keep, sell or refinance

Post by Nate79 » Thu Aug 09, 2018 4:31 pm

Sell. Even fails the most basic 1% rule.

euroswiss
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Re: Rental Property - Keep, sell or refinance

Post by euroswiss » Thu Aug 09, 2018 5:03 pm

With those numbers, you are losing money every month. Check out with housing authority how much you can raise the rent - they have a big say in this and you can't just willy nilly bump it up. However, if there is not a way to significantly increase the rent, then you are much better off selling the place. Even if you have to bring a few thousand bucks to the closing. There has been a huge runup in real estate almost everywhere in the country over the last 10 years. Yours has NOT even recovered what you paid - there is a very slim chance indeed that it will appreciate over the NEXT 10 years, so will keep bleeding cash. Dump it, even at a loss.

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Cobra Commander
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Re: Rental Property - Keep, sell or refinance

Post by Cobra Commander » Thu Aug 09, 2018 6:24 pm

daheld wrote:
Thu Aug 09, 2018 2:30 pm
So basically the place is worth roughly $15-20k less than what you paid for it 12 years ago? I assume you're making decent money and this is not going to break you either way.

If you do decide to remain in the rental partnership, I would absolutely refi to a fixed rate loan. I would also get some type of market analysis completed to figure out what kind of rent you should be charging. You might be missing out on a decent chunk of money.

It sounds as though you're not really interested in "staying in", and I would agree the potential benefits are pretty measly compared to the potential risks. Again, making assumptions here, but I am going to guess that your income level is such that taking on the hassle and risk of being a landlord isn't really worth it.
That's about right although the loss is split 50/50 so I guess I'm out about $10K and yes, it doesn't really materially affect me. I think we started off around $1,050 per month and then raised it to $1,150 in 2 years when Section 8 was paying 100% with their mother and at that time we were above market on the rent. How would we go about doing a market analysis for the rent? I took a look and there aren't many direct comparables in the area for rent now but if I had to estimate I would say we are under market by a maximum (being generous here) of $200 a month and most likely closer to $100 a month. Zillow says the estimated rent on the place is $1,300 but I doubt their algorithm is accurate as it is often incorrect regarding property values.

You're also right that I'm not all in on the minor hassle of being a LL. Perhaps I would feel differently if we were making more money on it.

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Cobra Commander
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Re: Rental Property - Keep, sell or refinance

Post by Cobra Commander » Thu Aug 09, 2018 6:27 pm

renue74 wrote:
Thu Aug 09, 2018 3:07 pm
Property is not cash flowing and it looks like appreciation is not that great either.

https://docs.google.com/spreadsheets/d/ ... sp=sharing

I would sell the property. I would only have rental property that cash flowed.
What do you think about the possibility of refinancing? That would bring our monthly payment down a little bit and perhaps make it cash flow positive?

Another general question is, to the extent my partner is interested in taking over, what is a fair approach to the sale? My thought was to take the price of the one comp and subtract the cost of replacing the carpets and painting so it would be an apples to apples comparison and use that as the sale price. How, if at all, would we split any of the other selling costs? Presumably he would pay any points associated with a refinance and I would pay any seller closing costs and he would pay any buyer closing costs? In a way, him buying it produces a very favorable outcome for me because I don't have to carry the house while vacant for a period of time waiting for a sale nor would I have to pay real estate commissions.

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Cobra Commander
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Re: Rental Property - Keep, sell or refinance

Post by Cobra Commander » Thu Aug 09, 2018 6:28 pm

megabad wrote:
Thu Aug 09, 2018 3:46 pm
I am seeing interest rates under 5% for investments at excellent credit, but it doesn't really matter as I agree with the above. A section 8 condo with almost no positive cashflow is a great candidate for sale. Dump it and move in. Find a rental closer by with better cashflow if you desire. At these returns, I would strongly prefer a bank CD and I am a pretty devoted real estate investor.
I probably wouldn't pick up another rental if I get rid of this one to be honest. With one young child and another one on the way I feel fairly busy these days and I just don't think the extra money would materially improve my life in a way that it would be worth the extra responsibility. I guess part of the reasons I'm hesitant is because I feel a little lazy taking this approach but there's value to simplicity in life too.

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Cobra Commander
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Re: Rental Property - Keep, sell or refinance

Post by Cobra Commander » Thu Aug 09, 2018 6:30 pm

tesuzuki2002 wrote:
Thu Aug 09, 2018 4:10 pm
Cobra Commander wrote:
Thu Aug 09, 2018 11:57 am
Purchase Year: 2006
Purchase Price: $185K (about $40K downpayment)
Ownership: 50/50 with former law school classmate - we get along well
Mortgage: $145K - 30 year ARM (adjusting upwards from 4% to 5% this year)
Current rent: $1,150 per month (about half is from Section 8 voucher)
PITI: $934 (with the interest rate increase)
HOA: About $125 per month (covers all exterior maintenance, lawn, roof, siding, etc.) and goes up about $5-$10 each year
Loan balance: $108K
Value: $168K based upon a recent comp but it would take between $5K to $10K of repairs to sell (new floors and painting). Property values have been rising somewhat (last year the comps were in the 150s).
HHI: About $250K
Age: 36 (me), 33 (DW). We have one 18 m/o and a newborn coming soon

As noted above, I currently co-own 50% of a townhouse with a former law school classmate and I am wondering whether I should keep, sell or refinance the house. I lived in the house during law school and became an accidental landlord when I graduated due to the housing crash because we weren't willing to stomach the loss at that point. It's odd but we have had the same family living there the entire time we rented (first the mother, she was a terrible tenant and then she moved out and her kids assumed the Section 8 voucher) so on the bright side the house has been consistently rented. As noted, I am familiar with the risk factors and irritation of a terrible tenant and the destruction they can cause. Her children have turned out to be great tenants and although they sometimes pay some of the rent a week late they always communicate with me (i.e. they tell me they will have the rest of the rent by Friday and they follow through).

I question whether it is worth it to keep this property. To the extent I do keep it, it probably makes sense to refinance into some form of a fixed rate mortgage. Rates I am seeing now for investment properties are around 5.375 for no points and higher/lower options based upon the amount of points one pays.

The biggest risk factor I see is a non-paying tenant and the costs of evicting this tenant because I live 2.5 hours away. Other risks are that I have to pay for all maintenance because we live too far away to do it in addition to the minor inconvenience of scheduling maintenance. Generally the tenants are home when workers come so no issues there.

It just seems like the rate of return is fairly low for the risk factors involved. The rent barely covers the mortgage payment although about $340 in principal is being repaid so there is some return plus appreciation. I am also not totally sure if they are paying market rent and am not sure how we would find out as there are very few properties listed for rent in the area.

To the extent my partner is willing to buy me out I was thinking we would take the comp which is the exact same townhouse we have and then subtract from it the costs of new flooring since our floors are destroyed. Does that make sense and does that seem fair to you guys? Alternatively, should I hold on to the townhouse?

Happy to answer any questions and provide any additional information.

Where is this located ??

We have some similarities.. I bought my rental in 2006 for $159K, Current comps are $210K

I will have the mortgage paid off this year. I've been cash flowing about $400 a month. However, the mortgage being paid that is going to jump to around $1200. I'm long distance. CA to MI. Can't decide if I should sell and cash out and invest my $200K elsewhere or stick with it.
The townhouse is located in Charlottesville, VA but not walkable to UVA so not necessarily appealing to college students. Maybe grad students as it is a long~ish walk to downtown. I have made the walk before on a few nice weekend nights when I lived there.

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Cobra Commander
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Re: Rental Property - Keep, sell or refinance

Post by Cobra Commander » Thu Aug 09, 2018 6:33 pm

euroswiss wrote:
Thu Aug 09, 2018 5:03 pm
With those numbers, you are losing money every month. Check out with housing authority how much you can raise the rent - they have a big say in this and you can't just willy nilly bump it up. However, if there is not a way to significantly increase the rent, then you are much better off selling the place. Even if you have to bring a few thousand bucks to the closing. There has been a huge runup in real estate almost everywhere in the country over the last 10 years. Yours has NOT even recovered what you paid - there is a very slim chance indeed that it will appreciate over the NEXT 10 years, so will keep bleeding cash. Dump it, even at a loss.
The housing authority is a relatively small authority so I think I could easily get away with a $100 a month increase. I have done it before several years ago and it was approved without a hitch so I wouldn't expect an issue. I'm actually just not sure what rent the market would bear and I'm not particularly keen on playing chicken with my long-term tenants. I mean, if they move out I probably have to engage a realtor to show the unit because I'm not driving 2.5 hours to show it and then there's the carrying costs while we wait for it to rent. Not to mention we would have to replace the carpets which are almost 15 years old and repaint so a few thousand dollars in repairs as well. I suspect our current tenants would be amenable to a $100 a month increase but you never know, they may decide it's not worth it.

Edit: I didn't think I was necessarily losing money because we've had the extremely good fortune of 100% occupancy with long term tenants which I realize isn't guaranteed. I realize we're not making much money but we are paying down a decent chunk of principal and it is ever so slightly cash flow positive as the repairs thus far have been minimal. Keep in mind that the PI portion has increased with interest rates in the last two years by about $120 dollars so we had a little more margin before.

WildBill
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Re: Rental Property - Keep, sell or refinance

Post by WildBill » Thu Aug 09, 2018 7:24 pm

Howdy

Negative cash flow and it looks like minimal potential for appreciation/continuing depreciation in value. Some potential hassles with tenants and repairs. No brainer. Sell it ASAP as it is a liability every day you continue to own it.

You probably have a breakeven tax wise as the decrease in basis should just about equal your capital loss. Either way, eat the loss and write it off or pay taxes on the minimal capital gain.

There are many much better and cheaper hobbies than negative cash flow real estate.

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

JGoneRiding
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Re: Rental Property - Keep, sell or refinance

Post by JGoneRiding » Thu Aug 09, 2018 10:06 pm

Cobra Commander wrote:
Thu Aug 09, 2018 6:27 pm
renue74 wrote:
Thu Aug 09, 2018 3:07 pm
Property is not cash flowing and it looks like appreciation is not that great either.

https://docs.google.com/spreadsheets/d/ ... sp=sharing

I would sell the property. I would only have rental property that cash flowed.
What do you think about the possibility of refinancing? That would bring our monthly payment down a little bit and perhaps make it cash flow positive?

Another general question is, to the extent my partner is interested in taking over, what is a fair approach to the sale? My thought was to take the price of the one comp and subtract the cost of replacing the carpets and painting so it would be an apples to apples comparison and use that as the sale price. How, if at all, would we split any of the other selling costs? Presumably he would pay any points associated with a refinance and I would pay any seller closing costs and he would pay any buyer closing costs? In a way, him buying it produces a very favorable outcome for me because I don't have to carry the house while vacant for a period of time waiting for a sale nor would I have to pay real estate commissions.
That is probably more complicated than needed since they already own half. You can use a simple sale agreement for your state or write up an agreement and quit claim them your share while they simultaneously get a new loan in just their name.

I don't know about va real estate . In my state I could take a simple agreement to a title company and have them do the work no lawyer involved but I could also file paper work with the county in my own

Nissanzx1
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Re: Rental Property - Keep, sell or refinance

Post by Nissanzx1 » Thu Aug 09, 2018 11:04 pm

I'd want out of this deal pronto. Not any meat on the bone left and partnerships scare the hell out of me. ARM too? 😳

Sell it is my vote.

We have a rental home (paid $35,000) that gets $650/mo.

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Cobra Commander
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Re: Rental Property - Keep, sell or refinance

Post by Cobra Commander » Fri Aug 10, 2018 6:00 am

JGoneRiding wrote:
Thu Aug 09, 2018 10:06 pm
Cobra Commander wrote:
Thu Aug 09, 2018 6:27 pm
renue74 wrote:
Thu Aug 09, 2018 3:07 pm
Property is not cash flowing and it looks like appreciation is not that great either.

https://docs.google.com/spreadsheets/d/ ... sp=sharing

I would sell the property. I would only have rental property that cash flowed.
What do you think about the possibility of refinancing? That would bring our monthly payment down a little bit and perhaps make it cash flow positive?

Another general question is, to the extent my partner is interested in taking over, what is a fair approach to the sale? My thought was to take the price of the one comp and subtract the cost of replacing the carpets and painting so it would be an apples to apples comparison and use that as the sale price. How, if at all, would we split any of the other selling costs? Presumably he would pay any points associated with a refinance and I would pay any seller closing costs and he would pay any buyer closing costs? In a way, him buying it produces a very favorable outcome for me because I don't have to carry the house while vacant for a period of time waiting for a sale nor would I have to pay real estate commissions.
That is probably more complicated than needed since they already own half. You can use a simple sale agreement for your state or write up an agreement and quit claim them your share while they simultaneously get a new loan in just their name.

I don't know about va real estate . In my state I could take a simple agreement to a title company and have them do the work no lawyer involved but I could also file paper work with the county in my own
Oh I wasnt planning on drafting up an agreement or anything beyond what the title company would have me sign. There will be various costs and I was just curious how to allocate them. I suppose if he refinances they will do an appraisal so we could just use that as the selling price and keep it easy although that might not account for the condition of our unit as compared to the ine that sold.

daheld
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Re: Rental Property - Keep, sell or refinance

Post by daheld » Fri Aug 10, 2018 9:01 am

Cobra Commander wrote:
Thu Aug 09, 2018 6:24 pm
daheld wrote:
Thu Aug 09, 2018 2:30 pm
So basically the place is worth roughly $15-20k less than what you paid for it 12 years ago? I assume you're making decent money and this is not going to break you either way.

If you do decide to remain in the rental partnership, I would absolutely refi to a fixed rate loan. I would also get some type of market analysis completed to figure out what kind of rent you should be charging. You might be missing out on a decent chunk of money.

It sounds as though you're not really interested in "staying in", and I would agree the potential benefits are pretty measly compared to the potential risks. Again, making assumptions here, but I am going to guess that your income level is such that taking on the hassle and risk of being a landlord isn't really worth it.
That's about right although the loss is split 50/50 so I guess I'm out about $10K and yes, it doesn't really materially affect me. I think we started off around $1,050 per month and then raised it to $1,150 in 2 years when Section 8 was paying 100% with their mother and at that time we were above market on the rent. How would we go about doing a market analysis for the rent? I took a look and there aren't many direct comparables in the area for rent now but if I had to estimate I would say we are under market by a maximum (being generous here) of $200 a month and most likely closer to $100 a month. Zillow says the estimated rent on the place is $1,300 but I doubt their algorithm is accurate as it is often incorrect regarding property values.

You're also right that I'm not all in on the minor hassle of being a LL. Perhaps I would feel differently if we were making more money on it.
I would start with a realtor. If you have or can find one you trust, they should be willing to do this for you for a fee. We have used the same realtor a few times and have referred her a lot of business. We just purchased a home and sold our old one about 6 months ago, and when we did I was initially thinking we'd keep the house we moved out of as a rental. Our realtor offered to do a free rental market analysis, which was pretty generous considering it would've meant she'd miss out on a sales commission. I do think she sort of offered as a thank you, as we've made her probably $50,000 in commissions in the last few years between our purchases and those we referred her.

I'm willing to guess there'd be a few who would be willing to do this for a couple hundred bucks.

JGoneRiding
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Re: Rental Property - Keep, sell or refinance

Post by JGoneRiding » Fri Aug 10, 2018 9:08 am

Don't use a realtor there isn't any need. You aren't truly selling the house as much as restructuring the partnership and removing your interest. A title company can easily handle that. There should be no need for additional title insurance use the title company used last. The cost of the title company should be split 50/50. The cost of the refi should be the partners 100% come up with a price you both agree is fair. The goal is to get put of liability not to make any money

renue74
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Re: Rental Property - Keep, sell or refinance

Post by renue74 » Fri Aug 10, 2018 9:52 am

JGoneRiding wrote:
Fri Aug 10, 2018 9:08 am
Don't use a realtor there isn't any need. You aren't truly selling the house as much as restructuring the partnership and removing your interest. A title company can easily handle that. There should be no need for additional title insurance use the title company used last. The cost of the title company should be split 50/50. The cost of the refi should be the partners 100% come up with a price you both agree is fair. The goal is to get put of liability not to make any money
You should verify your partner is "willing to buy" you out. I started doing a couple rental properties about 4 years ago with a very nice partner. We both were handy and we both "kept our end of the deal," throughout our partnership. He ended up moving to Naples, FL and I was stuck with 2 rentals. It was fine...they were low maintenance, but we self-managed...and I sent him his % of rent every month.

The market was super hot and I ended up suggesting to him that we just sell both rentals. We made good $...maybe 5 or 6 years of rental income equivalent...on the sell of the properties and it was easy for us to dissolve our partnership. All was well.

But, your partner may not be willing to buy you out. If I were your partner, I would run the numbers in my testing spreadsheet and say, "oh my goodness, this rental is bad...I don't want to own the whole thing."

Maybe start out at offering to sell him your half at the market comp rate, but if he baulks, you need to have a plan B....which is either, give it to him at a higher discount or convince him to sell it together.

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Cobra Commander
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Re: Rental Property - Keep, sell or refinance

Post by Cobra Commander » Fri Aug 10, 2018 10:19 am

renue74 wrote:
Fri Aug 10, 2018 9:52 am
JGoneRiding wrote:
Fri Aug 10, 2018 9:08 am
Don't use a realtor there isn't any need. You aren't truly selling the house as much as restructuring the partnership and removing your interest. A title company can easily handle that. There should be no need for additional title insurance use the title company used last. The cost of the title company should be split 50/50. The cost of the refi should be the partners 100% come up with a price you both agree is fair. The goal is to get put of liability not to make any money
You should verify your partner is "willing to buy" you out. I started doing a couple rental properties about 4 years ago with a very nice partner. We both were handy and we both "kept our end of the deal," throughout our partnership. He ended up moving to Naples, FL and I was stuck with 2 rentals. It was fine...they were low maintenance, but we self-managed...and I sent him his % of rent every month.

The market was super hot and I ended up suggesting to him that we just sell both rentals. We made good $...maybe 5 or 6 years of rental income equivalent...on the sell of the properties and it was easy for us to dissolve our partnership. All was well.

But, your partner may not be willing to buy you out. If I were your partner, I would run the numbers in my testing spreadsheet and say, "oh my goodness, this rental is bad...I don't want to own the whole thing."

Maybe start out at offering to sell him your half at the market comp rate, but if he baulks, you need to have a plan B....which is either, give it to him at a higher discount or convince him to sell it together.
Yes, I definitely have to float the idea of him buying me out although I believe he offered once in the past. He's actually the one that suggested a refi so it seems like he's interested in holding on to it. I want to be fair/reasonable on the offering price and I'm not sure it would be fair to use the comp without some discount for the repairs that will be necessary to make it an actual comp (i.e. new laminate floors which all of the sold townhouses seem to have). I'm somewhat curious why he seems interested in holding on to it since he's a smart guy but perhaps he's stuck on the sunk costs or doesn't fully appreciate the risk factors related to vacancy and/or a non-paying tenant. As I noted above, selling to him is a blessing in a lot of ways as I do not need to (i) pay realtor fees, (ii) pay carrying costs while the house is vacant on the market and (iii) deal with the hassle of scheduling all of the repair work.

To the extent we sold it altogether I think it would be best to wait until Spring to do so to give us time to clean it up and get it on the market as the prime selling season is almost over.

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