Sell or keep my rental property

[doublebase]

My tenants just notified me they are moving out, only gave me 9 days notice. The rent was bellow market value, and I guess this may give me a chance to increase the rent by $500 or so a month. However I’m getting older - I no longer want to work on another house - I can’t stand even working on my own house at this point.

I’ve had this three bedroom hip roof colonial for a rental property now for 15 years. It’s been good, yet at times stressful...you never know when you’re going to get a call, there’s been a few missed months rent here and there, some late payments, etc. The house is now in need of work (kitchen and bathrooms are very dated), the last tenants were very rough on the place...needs new carpets, paint, hardwood floors need refinishing.

Would you sell it or keep it? If I sell it I’d lose probably close to 100k of the sale price because of capital gains, realtor fees, and depreciation. It’s also not a great time of year to sell a family home (school is starting next week).

Part of me also doesn’t want to sell because I own the home outright, and I use the rental income as income. But, like I said, this house probably needs a good $30,000 worth of work now, maybe more. I probably could get around $410,000 for the house sold as is. Minus everything I mentioned, walk away with $310,000-$330,00.

whereas if I keep it, get $2,600 a month, but also keep the headaches. A friend advised me to keep it, and think of it as a business. Don’t do the work yourself, hire someone. If I do that obviously the profits go down. What would you do? Keep or sell?

 

[GON]

City and state the home is located in?

 

[nwjones18]

I'm in the middle of the sell vs rent decision with my current house as I'm moving.. The fact that's its my current primary residence and can avoid capital gains by selling now is tipping the scales in the sell direction.. That along with high house prices anyway.. My current mortgage is 2.75% and would be paid off in 7yrs made me want to rent bad though.

You'd be walking with close to 12yrs rent in your pocket.. IMO if you're tired of dealing with it sell and set the money somewhere it will earn interest.. Heck you could set it in a discover savings account right now and pull 1200 a month interest..

 

[Dave Hess]

SELL.

You don’t need all the stress, aggravation, headaches and liabilities.


I thought about having rentals and did the math…… my stock market gains always beat the estimated rental income / value of properties. I calculated and crunched these numbers many, many, many times before and me clicking a mouse was ALWAYS the better option and decision.

Trust me on this and I live in a very hot housing / rental market.

 

[cptbarkey]

As-is it requires a 1.5-2 years investment to make back the 30k updates. Thats a good inflection point. Sell.

 

[RhondaHonda]

Where is it located? I’m leaning sell.

 

[ArrestMeRedZ]

I'm going to make some assumptions here. If you are retired and have that net on the house sale of $320,000 invested, a safe withdrawal rate of 4% would give you $12,800 a year, or $1,067 a month. If on that $2600 a month gross rent you could net $2100 after all expenses, you'd be about $1k a month better off keeping the rental.

The 4% withdrawal rate allows you to adjust for inflation. The rental does too, as rents and the value of the house goes up as inflation has an impact.

From a numbers standpoint, you should keep it. If selling it helps you sleep better at night, sell it.

 

[atikovi]

needs new carpets, paint, hardwood floors need refinishing.

house probably needs a good $30,000 worth of work now, maybe more.

Those cosmetic repairs don't add up to anywhere near $30,000.

if I keep it, get $2,600 a month, but also keep the headaches.

Hire a property management company. They may take 10-15%, but less headaches for you. Plus it's a write off.

 

[Lubener]

Sell it before the real estate market tumbles. . It's not worth the aggravation.

 

[doublebase]

Where is it located? I’m leaning sell.

Massachusetts

 

[mrsilv04]

Those cosmetic repairs don't add up to anywhere near $30,000.

They do when you add in the outdated kitchen and bathrooms that were mentioned.

 

[doublebase]

Those cosmetic repairs don't add up to anywhere near $30,000.


Hire a property management company. They may take 10-15%, but less headaches for you. Plus it's a write off.

You bring up a good point about the property management company, a friend of mine swears by that. They’ll take one months rent to get it rented and put someone in there. However they also have some serious flaws, their job is to get it rented, they don’t really care who it goes to. Trust me, I had one just call me on my current tenants.

Unfortunately the current upgrades this house needs (bare minimum) is $5,000 in carpet, $1,200 hardwood refinishing, $8,000 interior paint. I could paint it myself, but it would take me multiple days, and I’d need staging. The bathrooms and kitchen are 35 years old, they both look horrible

 

[zzyzzx]

Minus everything I mentioned, walk away with $310,000-$330,00.

At current short term TBill rates, that's around $1400/month truly passive income free of state income tax.

 

[doublebase]

Sell it before the real estate market tumbles. . It's not worth the aggravation.

I don’t think the real estate market is ever really going to tumble, it should be tumbling right now with the current interest rates and state of the economy. I think if it can survive this, it can survive most anything. IMO.

 

[zzyzzx]

Those cosmetic repairs don't add up to anywhere near $30,000.


Hire a property management company. They may take 10-15%, but less headaches for you. Plus it's a write off.

I'm sure that there is stuff that the OP is not mentioning, plus you would be amazed what contractors charge these days for everything.

 

[doublebase]

At current short term TBill rates, that's around $1400/month truly passive income free of state income tax.

I’d be making $2,600-$2,800 in rent, minus taxes ($5,000 taxes, repairs $3,000 a year on average, insurance $2,000, $1,000 water bill). But I would have to spend around $20,000 to increase the rent to that $2,800 range.

 

[doublebase]

City and state the home is located in?

Massachusetts, North Shore

 

[Pablo]

We and MIL - we sold all ours.

I personally don't think PM is the answer either. It just adds another layer of headaches and expense and always amazed at what they DON'T do.

Rentals are fine if you are patient and don't mind a wide variety of hassles. I don't think they are great if retired.

 

[zzyzzx]

Massachusetts, North Shore

I think it's reasonable to assume that is probably a tenant friendly state where being a landlord should be avoided.

 

[Cujet]

I've always viewed rental properties as wealth builders. Either by paying off the house, and/or through providing passive income. Something that should be started early in life, and completed and liquidated by retirement. Leading to a nice nest egg for an easy retirement.

But, what do I know, I was never a landlord. I spent too much time at work to add in more complexity.