Should I Sell or Keep As Rental?

Question

I recently moved from a 4BR 3.5BA townhouse in Bowie MD. I bought this house in 2013 for 280K and PITI + HOA is ~1700. I owe ~200K on it and initially listed it for sale for 370K. I have had two contracts fall thru for job loss & financing issues. The max rent I can get on this property is around $2500. My initial reason for deciding to sell is because I have a property I bought in a short sale last year close by for 183K renting for $2600. It's hard to stomach a house worth twice as much renting for less.

So my question is - should I rent or sell this property?

Tyler Gibson · Answer

@Uchenna A. many people come to the forums asking questions similar to this. I'll be the first to answer on yours but my answer is the same as most of us on here so here goes. It depends, what are your long term goals? For me, looking at those numbers I can't think of a reason to sell it unless you want the equity to reinvest in something else. If you want the equity to go buy something else why not look at a cashout refi? If you want better cash flow why not look at Refi on the loan. Looks to me like you are getting, or could get close to $800/month cash flow which I think is pretty good. I guess the long and the short of it is, there are a bunch of people here on the forums that can tell you how to get something accomplished but it is much harder to provide guidance on how to get someplace when we don't know where you want to get to. I hope this is helpful in jumpstarting your thought process and if you can give more specifics as to what you want to accomplish I am sure myself and others would be happy to give plenty of advice.

Ray Slack · Answer

The Bowie Market has taken off over the last 3-5 years.. You will be VERY lucky to find anything for under $300,000 that rents for $2,500. You can't compare one lucky home run short sale you got a couple of years ago to today's market.  You have about $150k in equity in the house (after selling costs) You are netting about $9,600 positive cash flow by renting it out. (not including V&C or management)  Which is about a 6.5% return. (Not including future appreciation and paying down your mortgage)   Unless you have have somewhere to put the money that you can earn a higher return keep it as a rental.

Uchenna A. · Answer

Thanks Tyler. My long term goal is to acquire a few more buy and hold rentals. I have zero need for the equity at the moment. In fact I even find it very difficult to compete in the current market buying additional rentals because I keep comparing today's prices to prices of properties I acquired in the last few years. You make a very strong case for holding it but I will see what others have to say about it. Thanks again!