Should I sell house or keep renting it?

Question

Deciding if I should continue renting this property or to sell-off. I moved out of it to move closer to work so I'm 45 minutes away from it.

Current Mortgage: $161k Balance @ 4.625% 20 years conventional- 12 years left. Refinanced about 7 years ago from a 30 conventional to 20. Heloc: $14k @ 9%. Total monthly payment with insurance(2500) and taxes(11k) is $2600. Current Value: $450k.

mortgage break down :$1432 $811.10 is principal / $621.19 is interest

Has been rented for 5 years to current tenants, but they are set to be moving out of state. Currently, there is no way to value add to get increased rent unless I rent out each room to different people which would be a headache.

The house is located in Suffolk county long island NY the area is a middle-class suburb(94k household income avg). The house was purchased in 2001 for 300k. The current value is approx $450k.

House is in relatively good condition, the roof is 10 yrs old, windows 8, the boiler is 3 yrs old, the siding will need to be replaced in the front soon(5k). The kitchen was remodeled 12 yrs ago. Possible replacement of a few appliances coming up. General maintenance will be needed. There is a pool that has not been in use in 5 years so I'm expecting that to possibly be an issue but it was never in the lease so unless that changes for the next tenant its not a concern. Since it's been rented for 5 years there have been no major repairs thankfully, but that's always a possibility with any rental.

What would you do?

Rodney Harris · Answer

I would find a slight value add apartment building and 1031 into it!

Dennis Hajan · Answer

The area isn't somewhere someone would want to stay. It's not located next to anything attractive. As of right now, there are 0 properties in the same city listed, and very few near it and those that are just random single rooms for a night.

Matthew Koch · Answer

Is there a chance that the rental you currently have could be made into an Airbnb instead? I guess it would all depend on the least that you have with that tenant how long they are there for and instead of selling try the Airbnb route to where it might be beneficial to have your expenses paid off faster of course depending on the location as well and considering if your state allows that kind of thing and there's no anti-competition laws or something like that. Hope it works out for you and good luck

Scott Wolf · Answer

I don't think anyone can accurately predict a "bubble", and as long as you get a strong corporate tenant with a good lease, you should be in good shape.  The best way to source a NNN property is through brokers.  There are a ton of firms that specialize in NNN sales.

Dennis Hajan · Answer

The Hudson has been looking attractive for a couple of years now for sure. Do you think there's a lot of NNN properties to be had out of state in this price range? How do you feel about the valuations on commercial given a lot of people looking to 1031 and causing a "bubble"? In addition besides loopnet, and costar w/ broker any other ways to source NNN property out of state?

Scott Wolf · Answer

Dennis, you can always 1031 out of LI.  As someone who grew up there and owns small shares in a couple of commercial buildings there, I understand the equity/cashflow conundrum the Island presents.The Hudson Valley has gotten me good returns, or you can buy a low price point NNN property anywhere throughout the country, and have a management free property.

Always happy to chat.

Jeff Ronningen · Answer

@Dennis Hajan. Easy decision. Sell. Even if you have to pay capital gain and depreciation recapture. Currently you pay down about $10K principal per year and cash flow about $1K per year on about $290K equity, a return of less than 4%. You could do that well applying the funds toward your current mortgage and eliminate risk of repairs, vacancy, and management headaches. Or you could park that money on the sideline and wait for a buyer’s market.

Kristopher Kyzar · Answer

@Dennis Hajan I would look around to see if someone is selling a package of investment properties.  You'd be able to 1031 your returns from the sale of your current property into the package deal.  There's also roofstock.com where you can buy performing assests with your 1031 money.

Chris Mignone · Answer

@Dennis Hajan Yes you're correct about all that. However, you could also get 2 cheaper properties that add up to more than your current homes sales price.

Dennis Hajan · Answer

1031 sounds good for saving the capital gains or at-least delaying but at this price I’m not sure there’s much on the island. If anything I will just be in the same position without the equity.