Unsure whether I should sell property or rent it. Suggestions?

[Angela M.]

A little history: I've owned a century two story home in Orrville, OH for 14 years. I got married a few years ago and my husband wanted a ranch home. He was able to find a ranch that wasn't on the market in 2021 (w/the help of our realtor & word of mouth!) The sellers were in their 80's and wanted to move to Texas. He bought the home with 20% down, an interest rate under 3%. The new home is closer to his work, about 20 minutes away from Orrville. We did some work on the new home, mainly gutted the bedrooms, added a bathroom/walk in closet and recently moved into it. The rest of the home had been recently remodeled in the past 10 years, kitchen/dining area, bathroom.

 My husband thinks we should rent the Orrville property, but I was thinking of selling. The Orrville property is 100 years old but the equity/value of the home is considerably more than three years ago when I had checked with a realtor about selling but decided not to at the time. This month I had a new roof installed and new vinyl siding is going to be installed soon. My homeowner's insurance paid for the roof and surprised me by agreeing to do all new siding.  I was missing a piece and another section a few pieces on the side kept coming loose. The property is solid, and I've maintained it over the years. In 2008 when I bought it I had a new furnance, water heater and electrical updated. In 2012 I updated the upstairs bathroom. In 2018 new flooring in living room, 2019 A/C unit installed etc. 

Would it be better to sell the property or hold on to it? 

I bought the home for $97,000 & I could probably get around $150,000 if not more for it. The mortgage is around $700 a month and my husband said we could rent it out for around $1100 per month. (3 bdrm or possible a 4th bdrm/2 bath, 1900 sq ft). My husband has an interest in investing, and he thought we could start with this home .....  

[Joe Villeneuve]

Quote from @Bill B.:

100 year old home to make $5,000 per year if there is zero vacancy, zero management expense, and zero repair? No thank you. You have a property that didn’t increase in value 50% in 14 years. You actually managed to lose money after inflation and repairs. That is not ideal. 

Sell and move on.  Maybe you’ll find a better rental near your new home. Or you’ll find a better dream home and you can rent out this new place in the future. 

I second what Bill just wrote, and would like to reinforce his statement with some rough numbers.  You probably have around $40k left in your principle/mortgage.  If you could sell the property for $150k as you say, after closing costs, you could have around $100k in walkaway cash to move forward with.  If you used that money as a 20% DP, that would mean a new property value of around $500k.  As Bill said, that's a $350k loss.

Furthermore, based on the rent/mortgage pmt and potential taxes/insurance payments, you would have a CF of no more than $200/month (that's negative CF waiting to happen), or $2400/year.  Based on an equity position of $100k if you keep the property, it would take you over 40 years of CF to come close to that equity position.  Now, based on the $350k loss in PV if you sold the property, that same $2400/yr CF (if kept) would mean it would take a couple of centuries to come close.

REI is a numbers game. When in doubt, always let the numbers with $$$ in front tell you the direction to take. The numbers don't lie, so don't argue with them...you'll lose every time if you do.