All Forum Posts by: Lewis A Martinez

Hi Mary,  

Thanks for the idea.  Two back of the envelope calculations using a basic savings calculator, both comparing keeping the house to investing 50 K and $776/month in a "safe" 60 bond/40 stock split.  

1) House appreciates at 3.7%, bond/stock appreciates at 7.8%.  After seven years, I've netted 231,500 on the house; 172,500 in the bond/stock fund.

2) House tanks 20% a year from now; stock/bond fund similarly tanks 10% of its value a year from now.  Both appreciate normally after that.  I wind up with 157,100 in equity in my house, and 162,308 in value in my bond/stock fund.  

Note that neither of these scenarios count the cost of selling the house.  

I'm using 7 years as my event horizon because that's earliest I could possibly retire if everything goes perfectly.  So that's the time I'd likely start thinking about cashing out.  

Thanks for all your responses.  Here's some more info:

1) I don't want to be a real estate investor.  This was meant to be my "forever" home--it only became a rental because I moved into my spouse's house.  If I sold it, I would likely invest in some kind of mixed bond/stock fund.  

2) Current financial situation is good.  Both of us have good jobs, and this house is the only debt either one of us have.  I have decent savings stashed away, but would like to have more.  I have a good pension plan at work, but would need additional to retire early.  So I could stand the expense if I could be assured this was a good long term investment.  

3) I thought of refinancing, but paying longer on the house doesn't appeal to me.  And it still doesn't fix the fact that the rent barely pays interest, taxes, maintenance, etc.  

4) Floors in the house are original and not very high quality (think linoleum and cheap carpet).  I'm thinking whichever way I go, I'm fated to buy new floors once these tenants move out, among other things.  Those expenses, plus the normal expenses of selling make me think I'd be lucky to have 50K in hand if I sold.  

5) On an emotional level, part of me wants to hold at least until it's back to what I paid for it.  But logically, I realize that's not very good thinking.  Right now, based on all your comments, I'm leaning toward selling in spring 2019, or when my current tenants move out, whichever comes first.  

I never intended to become a landlord.  Bought house new for 300K in 2006 at the height of the real estate boom.  Refinanced in 2012 on a 20 year loan at 4% through HARP.  House now worth 240K.  I now owe about 160K on it.  Began renting it out about a year and a half ago when I moved into my wife's house.  Tenants are now on a month to month tenancy.  Here are the numbers, as best as I can figure them:

Rent:  1395/month

Expenses:

Management 112/month

Landscape  75/month

Vacancy  42/month  (assuming 3% vacancy rate)

Maintenance 248/month (assuming 1% of original purchase price per year--been less than that so far)

Interest: 546/month

Insurance: 106/month

Taxes: 239/month

Principal:  $803/month

So total expenses not counting principal are about 1368, leaving about $27 profit.  Including principal, it's about a $776 negative cash flow.  

My thoughts:  1) If I could be assured of 3-3 and 1/2 percent appreciation, keeping right now seems better than selling and investing the proceeds in a mutual fund.  2) My experience with the real estate crash has left me gun-shy.   And some quick Googling revealed some thought that we are due for a real estate downturn in early 2020.  So from that standpoint selling looks safer.  But I'm curious to see what you all think.