All Forum Posts by: Stephen Williams

Hi Stephen, if the numbers work, you could always rent it for 1 year and then sell if it's not working for you. If you haven't already done so, I'd work and re-work the numbers in a spreadsheet to ensure that you've got the return calculated as accurately as possible. Numbers to consider:

I appreciate that the tenant may pay the first three of these, but still mentioning them in case not.

Utilities Water

Utilities Electricity

Utilities Heat

Utilities Garbage & Recycling

Snow Removal (does it snow in Seattle??)

Landscaping

Proeprty Taxes

Insurance

Mortgage Payment

Vacancy - 7 to 10% is national average

Property Management - Roughly 10% of total rent (Call a few local property management companies to get actual quotes if you haven't done so)

Repairs - Oven not working, plumbing etc.

Capital Expenditures Reserves - What shape is your roof in? etc.

Also for your return, you'll want to calculate that based on the money that you've personally invested out of pocket into the place. If I'm understanding your post correctly you might be calculating the return based on the market value of the property, i.e. 775k - but it doesn't sound as if you've placed 775k of your own money into the property, since you've stated that you have a mortgage.

What you'd want to do instead to calculate the return is you'd take your annual rental income, minus all of the expenses in a year, expenses being everything that you're paying out of pocket in relation to the property, such as the examples above, and that gets you your cash flow. For example's sake, let's say rental income's 36k a year and all your expenses are 34k a year. Your cash flow is 2k a year (36k - 34k). If you've placed 150k into the property, i.e. down payment etc - to calculate your return you'd calculate:

2,000 = x% of 150,000

OR

2,000 divided by 150,000

which equals a return of 1.33%

The wild card here is, Seattle as I understand it has had a strong housing market in recent times. A decade from now could you have an additional $300,000 in equity? Potential appreciation is something else to consider in addition to your annual return. 

Good luck!

Sounds like a nice house . Now ask yourself " How much damage could a bad tenant do ?  AND then ask yourself  " How much would it cost to re do the inside of the house ? "         Some houses are just too nice to rent 

I don’t have a problem with the price and the rent, and especially the made up argument about equity in a deal. Simply take out a heloc, boom, normal equity in a deal, so ignore that argument. 

But…if you’re leaving the state consider this question. If you were living in Florida would you buy this property as a rental from there? If not, probably sell. 

But…what I consider important you left out. What did you pay for this property?  This is your chance to sell without paying taxes. If you’re only talking $50k in appreciation since you bought it, fine. But if it’s up $100 or $200k that’s $15-$30k in taxes you’re saving. How long will it take the rental to make that money just so you can be even with selling today?

I don’t think you have to give the house away. But do some math on the deal. Maybe talk to a PM about how much rent they could get and what you would bet in a Hans off deal. IF you have less than $50k in appreciation. 

 Pensacola FL is a great place! Very relaxed with an amazing beach. Hope you love it here!!!

@Stephen Williams welcome to BP! Sell it. I don't know if this is a good offer but in the end having that much cash tied up in equity you have to ask if you could earn more on that cash elsewhere. Comparatively speaking the lot size and 200 square foot more isn't going to bring you in much more rent unless you have an extra bedroom. There is also a risk is having all the cash in one rental. I am sure someone will give you cash on cash and return on investment numbers but the only way I could see this as a good investment is if it makes a great STR with higher numbers and you are hedging your bets on inflation.

@stephen when and where are you moving to FL? This is a tough choice and I would need more details on your goals and intents and timelines to make a better suggestion. One thing to question is have you considered doing an STR on that? You might be able to pull in 1.5-3x that much in monthly rent, and if so, I would keep. I'm from the west (SLC) and cities like that are going to continue to blow up over the next 10 years. There's several strategies you could take here, including unlocking some of that equity rather than outright selling. Again, just depends on the details.

I would have to agree with more doors less risk. I’ve lived in Tacoma and I know how expensive Seattle can be. I would do good market research for where you want to go in Florida and make sure the numbers make sense with active listing on the market now. If the city you choose to live in isn’t as investor friendly I’d consider smaller cities near where you plan to retire. We have purchased house hacked and sold in each place we have lived now the main focus is to develop a portfolio of properties ranging from A-C class in a lower taxed market in an area I’m familiar with. The vacancy for such a large expensive property deters me vs a property with a mortgage of equal value with 4-6 unit. Hope that’s helpful depending on where your headed in Florida I may know some realtors if you need assistance. 

@Stephen Williams welcome to BP! Sell it. I don't know if this is a good offer but in the end having that much cash tied up in equity you have to ask if you could earn more on that cash elsewhere. Comparatively speaking the lot size and 200 square foot more isn't going to bring you in much more rent unless you have an extra bedroom. There is also a risk is having all the cash in one rental. I am sure someone will give you cash on cash and return on investment numbers but the only way I could see this as a good investment is if it makes a great STR with higher numbers and you are hedging your bets on inflation.