Should I keep these properties or sell and invest in stocks?

[Jon Gorman]

Posting on behalf of a family member:

“I am trying to decide whether to continue to rent vs. sell two investment properties. Two equally important goals: first is to maximize return on investment without eating into principal; second is minimize headaches/stress/uncertainty. I am retired and living in a paid-off house. If I want to have enough investment income to maintain my current quality of life, is it better to continue to rent vs. sell these properties and put the money in the stock market instead, and live off the dividends?

Both properties are in NYC:

Property 1:

• Valued at 800k
• No mortgage
• If I sell, I estimate walking away with 720k after fees and capital gains
• Rent = 3300/month; expenses (condo fees, etc) = 1550/month. So yearly profit is 21k

Property 2:

• Valued at 625k
• No mortgage
• If I sell, I estimate walking away with 562k after fees and capital gains
• Rent = 2400/month; expenses (condo fees, etc) = 800/month. So yearly profit is 19.2k

So if I sell both properties, I would walk away with 1,282,000. If I put this in the stock market, I would need to make a return of 3.14% to match what I’m making in rental income.

Some variables include: fluctuations in the NYC rental market and value that properties may appreciate, increasing NYC taxes and condo fees, fluctuations in the stock market, maintenance costs that will be needed in the next few years that will not do much to increase the value of the properties.

I am not interested in leveraging these properties to buy a third. Too much headache for me.

In 10-15 years’ time, which is the better decision? Keep renting or sell and invest in stock market?

Any advice?”