Sell or keep my rental property

[PandaBear]

Rental is not passive income, even if you have a good management company to work with, you still need to make tough decisions on when to remodel (you need to once in a while), how much to invest in (remodel) and how much return you expect (how much per month, how long to wait for a new tenant before you lower the rent, when to increase rent).

Rental also make most of the money off the capital gain instead of rental income return. We just got out of a high inflation and low interest era, and the future is likely higher interest for a while, plus high construction cost (for repair and remodel), so all the signs are there to cash out now if you want to, instead of holding on for later.

You are likely going to earn the same amount in CD after you sell the property and cash out, with no headache, for at least a few years. If you don't mind some risk, index fund will likely return better than that as well. If you want to get back into rental afterward, you can always wait till after the crash if you are sitting on cash.

 

[ekrampitzjr]

This is another thing I’m worried about, prices are high in construction, to even find someone that will show up and do the work is a hassle right now. Never mind paying double what you paid five years ago. Meanwhile I haven’t kept up with raising rents in the area.

Two different sole-proprietors flaked on me when I wanted to get some brush and tree limbs cleared from my property. By "flaked" I mean they didn't show up at the agreed time (didn't come at all), didn't call to let me know they weren't coming, and couldn't be reached by phone. The work still needs to be done.

Relatives have said they're running into the same thing with plumbers, electricians, etc. Unfortunately, when the little guys who claim no one gives them a chance choose to flake, that leaves the bigger guys who are more expensive. They'll come, but at a price. That's what you're likely to face.

 

[Dave Hess]

List that house for sale today and 20 people will want it.
Lots of home buyers don’t mind doing R&R on bathrooms and kitchen.
Sell it ASAP !!!!!!

$330K minimum in your pocket and there will be market buzz of people wanting to buy it and fix up to their style and liking.

Sell, Sell, Sell, Sell

 

[MSCH]

. What would you do? Keep or sell?

probably sell it, throw the sale money in a Money Market Mutual fund paying about 5% and call it good to go. you'd net about 1700 a month from the 400k sale at the current 5% money market rate and wouldn't have to engage in the time consuming nonsense that wraps itself around owning and maintaining a building and collecting rent.

 

[gfh77665]

I am keeping my rentals indefinitely. Why not? its been a great experience so far. I bought for pennies on the dollar, and rents I command have soared! Too many people shying away from todays high mortgage rates, just want to rent now. I can almost name my price and literally have most of them rented by the end of the day if need be. When the time comes, I might liquidate one just for fun money. It will be worth even more then, as Houston and TX has phenomenal growth underpinning the demand.

 

[andrew_j]

$330k seems low for north shore. Rents are only rising and if you fix up enough you can get better tenant with higher rates.

 

[John105]

I think I’d keep it. I know next to nothing but in my head MA is low taxes good schools and it’s never going to be a ruin park like some places in this fair country

 

[Oldtom]

Sell. I had 2 rentals in a class D area for over 20 years. The area was just like the drug areas in Baltimore Maryland in the TV series The Wire. After having to house working tenants for free during Covid, a fatal drive by shooting while I was working at the rental, and a fire caused by tenant careless smoking, I sold for top dollar. The last millstone around my neck sold in July of 2022.

I do not really have the writing skills to describe how much less stress I feel but here goes: I was always on edge and did not really enjoy vacations for fear my lovely, compassionate, highly intelligent tenants ( SARCASM ALERT) would break something, set the place on fire, clog the toilet by flushing a large ham bone, destroy the AC condensing unit by punching holes in the coil before being evicted, or rip an interior door completely off the hinges, or put hundreds of ball peen hammer dents in a new steel exterior door, or decide they needed a vicious, homicidal pit bull as a pet.

I sleep better and turn my cell off at night. Any emergency can now wait till morning. I no longer have to deal with people who hate me for the crime of abusing them by charging rent. I consider the day the last tenant moved out to be a holiday and will celebrate it yearly as long as I live.

 

[Dave Hess]

Sell. I had 2 rentals in a class D area for over 20 years. The area was just like the drug areas in Baltimore Maryland in the TV series The Wire. After having to house working tenants for free during Covid, a fatal drive by shooting while I was working at the rental, and a fire caused by tenant careless smoking, I sold for top dollar. The last millstone around my neck sold in July of 2022.

I do not really have the writing skills to describe how much less stress I feel but here goes: I was always on edge and did not really enjoy vacations for fear my lovely, compassionate, highly intelligent tenants ( SARCASM ALERT) would break something, set the place on fire, clog the toilet by flushing a large ham bone, destroy the AC condensing unit by punching holes in the coil before being evicted, or rip an interior door completely off the hinges, or put hundreds of ball peen hammer dents in a new steel exterior door, or decide they needed a vicious, homicidal pit bull as a pet.

I sleep better and turn my cell off at night. Any emergency can now wait till morning. I no longer have to deal with people who hate me for the crime of abusing them by charging rent. I consider the day the last tenant moved out to be a holiday and will celebrate it yearly as long as I live.

If you don’t mind me asking, how much were the 2 rentals you sold worth ?

 

[Oldtom]

One 3 bedroom townhouse sold for $80,000 because I fixed it up very nicely. The other 4 bedroom townhouse sold as is for $75,000. I was burnt and had no remaining energy to fix anything beyond hauling away a U Haul full of trash. Both prices were a record for the area. A landlord who mentored me starting out said you buy rentals in high crime, drug and murder areas for immediate cash flow, not appreciation.

The area was a solid grade C rental area in 2001 when I first started out. Some drugs and shootings but liveable. I have lived in worse places. Now, due to being written off by the police, it is a scary war zone. The kind of responsible people you want as tenants will not live there unless they are dead broke.

 

[thastinger]

One 3 bedroom townhouse sold for $80,000 because I fixed it up very nicely. The other 4 bedroom townhouse sold as is for $75,000. I was burnt and had no remaining energy to fix anything beyond hauling away a U Haul full of trash. Both prices were a record for the area. A landlord who mentored me starting out said you buy rentals in high crime, drug and murder areas for immediate cash flow, not appreciation.

The area was a solid grade C rental area in 2001 when I first started out. Some drugs and shootings but liveable. I have lived in worse places. Now, due to being written off by the police, it is a scary war zone. The kind of responsible people you want as tenants will not live there unless they are dead broke.

Section 8 or other subsidized?

 

[Oldtom]

There is a lot of Section 8 in the area. I don’t know anything about the program. I have heard it works well for some and not for others. Not sure what the success or failure factors are?

 

[Hillbilly Deluxe]

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

Stick with buying cheap cars far away. You don't know anything about construction costs.

You aren't getting a decent contractor to show up today for less than $30k. A typical bathroom remodel is over $10k, more like $15k. A minor, cheap kitchen update will run $15-20k.

You don't do "cosmetic repairs" on a 30-50+ year old house. You've never done that obviously. There's a plethora of "might as well do this" and unforeseen circumstances once you start using a hammer and pry bar.

 

[Hillbilly Deluxe]

OP -

I would have a conversation with your accountant. Talk to them about:

1. Selling outright and your tax consequences regarding depreciation/etc. What is your cost basis on the house? Remember, there has been a change in tax rate of capital gains since 2021....

2. Making the improvements/repairs and increasing your sale price, while having the current year's expenses of taxes, insurance, repairs/improvements and that effect on your capital gains.

3. What about selling it to offspring/relative, letting them invest in it and continue it as a rental, giving you money off the record. Sell to them at a price point that would avoid the taxation. Just a thought.

 

[fantastic]

Stress & the responsibility were the two drivers that kept me away from renting out my property. I'm going to put a spin on your scenario though. Consider doing the updates and staging the house to get top dollar if selling it.

 

[Dave Hess]

Stress & the responsibility were the two drivers that kept me away from renting out my property. I'm going to put a spin on your scenario though. Consider doing the updates and staging the house to get top dollar if selling it.

Some have listed their property slightly under market and caused a bidding war and got more than they thought they could get.