Should I Sell or Rent

[John Reynolds]

My partner and I have a spec house in a newer subdivision that we're trying to decide whether to sell or rent it. It hasn't sold yet and my realtor says it's because it is priced too high. He says since it is a newer, unestablished subdivision we need to sell the first few houses as cheap as we can to get traffic into the subdivision and to show future buyers that it is a desirable area. Meanwhile, my partner has built two other houses in this subdivision on his own which he planned as rentals to begin with. He rented them almost immediately and says there is demand for rentals in the area. My problem with renting is when you figure for occupancy, maintenance, management, and PITI, there's no cash flow. The only thing you are gaining is principal paydown(and maybe appreciation.) If you count the principal paydown as income then the return on investment is between 7 and 9 percent during years 1-5. My other problem with renting it is since we haven't sold any houses in the subdivision, we don't know the actual value of houses in it. For all I know, I could sit on this house for five years, tie up capital and still sell it for a loss. Am I missing something? Any thoughts out there?