Rent or Sell , that is the question ?

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Brandon L. · Answer

@Jennifer Story this is a no-brainer. Keep the property and do what you have to do to get the equity out in a manner other than selling.

Bryan O. · Answer

@Jennifer Story it should be a pretty simple decision, just compare what the property makes you now (and add in management, etc. since it will be remote from you) and then compare that to what you would make if you sold and bought local. You mentioned "Several doors" locally. My guess is that means your best bang for the buck is to sell it and reinvest, but you would need to do the math for both scenarios to see which is better.

Paying off is a matter of personal choice. Mathematically, paying it off gives lower returns, but it also may be the thing you need to sleep better at night. Your personal tolerances and your goals will tell you what to do there... if you are still in your growth phase, paying it off gives you tons of "dead equity" that is the opposite of your goal and makes no sense. But if you're in a phase of going more passive, then more doors may be more headache than your goal.

Bo Goebel · Answer

@Jennifer Story If you're prepared to reinvest the money into something that will give you a higher ROI, then sell. If you are selling one SFH to purchase another SFH, I'd say you're back a square one. I'd say most often, holding the property that is cash flowing is a better idea.

It's mostly about if you are familiar with another market/submarket and if that market makes sense.

Regardless, make your decision out of prudent analysis and not fear (of what markets will or won't do).

Geoff Garrett · Answer

What are your goals with this?

Will this be easy to handle at a distance and still profitable? For me I would want to make sure it will be profitable when you leave as well as easy enough to rent. It would be a bummer to hold onto a place and lose money every month.

How much headache do you expect it to cause and is that more or less than you are will to handle? If its going to be a easy and money making place after you refinance out of it I think that is a good case to keep the place.  If it is going to cause headaches and or barely break even before vacancy and turnover etc Id sell it.

Also were you living in it for more than 2 years and planning on moving? If you lived in it to be able to take 250k single of 500k couple worth of profit you may want to go that. After a period of time you will no longer have that advantage.

Personally as long as you expect to make a fair amount of money every month and the turn over will not be to much of a headache to handle. I am a big fan of keeping and financing out your equity.  This is because you can write off all the interest as well as not having to pay taxes on profits (assuming you didn't live in this long enough before leaving).

Let us know what you decide!

Mark Glasgow · Answer

10 years is too long to payoff for sn investment property.  Id be more comfortable with a 5-7 year payoff.

Im guessing here but your home sound like its worth about $220,000-$230,000 and if your going to take 10 years to pay back 155k you are valuing rent at about $1300/mo?  Are you applying the entire rent to principal or just making the payments? Jow much are the payments?

You should be getting closer to 1% of the value of your home in rent so closer to $2,000/mo on the extremely low side.

Whats the market like in your area now?

If you sell your 230k home with realtors by the time they take their cut 7% about $16k and closing fees and any taxes you pay on the property you'd probly be lucky to get to put $45-50k in your pocket to reinvest.    What can that fo for you in your area?

Without knowing more details my gut says to hold the property and agressively pursue a higher rent. Depreciate it on your tax returns and revisit selling it in 7 years.

Jennifer Story · Answer

Thanks Yusef. I think the HELOC would only hurt me here since I cannot get what I need to get at least 1% out of the property. It would take so much more time to pay off and I would loose the tax credits of selling now .

Yusef Griffin · Answer

I'm a new investor and still super green, but here is my advice. Since the rental market is strong and your interest rate is phenomenal, I would keep renting out the unit as long as it cash flows. I love the buy and hold strategy because in 10 years when the loan is paid off, you will have more cash coming in each month. You can take advantage of the tax benefits from the interest rate and depreciation in the mean time. Since you have 70k in equity, you could take out a HELOC, if all of the numbers work in your favor and use that cash to reinvest in your local area. When the loan is paid off, the price of your property should be higher, which means more money you can take out with the HELOC.

Jennifer Story · Answer

The subject property is in Kissimmee, Fl. I have since relocated to metro Atlanta and have conventional new mortgage. I think based on many great points mentioned in this thread the plan will be to sell without a doubt and look for a multi unit buy and hold.

Keith Gilbert · Answer

As others of noted, it doesn't look like the rent ratio is great on the property in the current situation. Having PMI definitely doesn't help and as you noted, you won't be able to drop it. Based on your current margin, once you factor in the additional management costs, vacancy, etc., I would consider it a risky property to rent.

You mentioned ATL is the local market? What are the trends like? Is property still appreciating as fast as it has been?I would likely look at selling and then determine how much buying power that will give you in your market with rough cash flow estimates. If you net 70k, you could consider house-hacking a multi-unit under and FHA loan option and using the rest for a traditional 20-down to avoid your PMI again.

Basit Siddiqi · Answer

@Jennifer StoryI think you should sell it.As you mentioned - the sale will be tax free since you lived in the property for 2 out of the last 5 years.assuming $70,000 is the appreciation - you are saving about $15,000 of tax if you factor in 15% capital gains tax rate and 6% Georgia Income tax rate(disclaimer - your actual tax rates may differ).

You can take the proceeds and purchase a property with a better rate of return.Furthermore, if you are in the market for another personal residence - you will be entitled to use another FHA loan.(you currently can't have 2 FHA loans at the same time).

Rent or Sell , that is the question ?

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