Sell or keep my rental property

[alarmguy]

I’m getting older now and have a rental property. It’s been good to me for decades being as commercial/mixed use building the tenants had a triple net lease which meant I did no maintenance, taxes or insurance.

With that said, you have to calculate your return on investment if you didn’t have that property, but the cash in the bank or investment. Would you be coming out with the same profit as you did on the rental?

For me, it’s a little simpler. My return on investment is good but I could match that if I just cashed out and sold the building or come close to it.

I have decided while I’m still on this earth I want to cash out and have that money in an investment or in my bank account, free to use it if I choose or need to, rather than leave a asset to my kids.
Don’t misunderstand me my kids will still get the leftovers of the inheritance, but why do I want an asset aquired as part of my working career untouchable except after I leave this earth?

 

[Vil_Riker]

Hire a trustworthy property management company and let them have the headaches. Yes, your net goes down but it becomes passive income.

 

[Vil_Riker]

Don’t misunderstand me my kids will still get the leftovers of the inheritance, but why do I want an asset aquired as part of my working career untouchable except after I leave this earth?

Capital gains tax... Your children's basis will be the fair market value at the time of inheritance and they will not pay any capital gains tax when they inherit and sell the same day. When you sell, you have to recapture the depreciation and any capital gains for tax purposes.

 

[SevenBizzos]

Sell.
I indirectly am in the rental market and there's no way I'd ever own one. So that is a biased answer. Take the net cash, invest it, and withdraw as needed.

 

[goingplacesanddoingstuff]

I’m selling my out of state rental property. Property taxes doubled in the past three years, the rental agency constantly fleeces me with bogus repairs, and I’m sick of the unpredictability and stress.

I’m likely just going to put the proceeds into owning my next residence outright. I’m not going to live forever, so converting a stressful investment into an asset that reduces stress is a good move for me. The business aspect has been a good education on taxes, but I can simply start another business for those benefits.

 

[atikovi]

Residential rentals are a pain. No matter how you word a lease to say the tenants are responsible for repairs in exchange for lower rent, local regulations will often overrule that. Commercial properties are much more forgiving. Only have one commercial rental bought about ten years ago for $75,000 that I rent out for $1000 a month. Tenant covers any repairs and I just pay the taxes and condo fee. Nets about $750 with no worries. Haven't raised the rent so the current guy of 5 years pays on time and is motivated to stay. The purchase price has been pretty much paid off now.

 

[goingplacesanddoingstuff]

Residential rentals are a pain. No matter how you word a lease to say the tenants are responsible for repairs in exchange for lower rent, local regulations will often overrule that. Commercial properties are much more forgiving. Only have one commercial rental bought about ten years ago for $75,000 that I rent out for $1000 a month. Tenant covers any repairs and I just pay the taxes and condo fee. Nets about $750 with no worries. Haven't raised the rent so the current guy of 5 years pays on time and is motivated to stay. The purchase price has been pretty much paid off now.

Not a bad idea to ensure you only ever deal with other business owners.

 

[JavierH19]

Sell it. The return on rental homes kind of suck compared to even an index fund.

 

[joekingcorvette]

Sell. Not worth the hassle plus if something happens to you it's left for others to worry about.

 

[Zee09]

Sell

 

[SC Maintenance]

We rented out what had been our family home in 2008, and were too far away to do anything regarding repairs ourselves. The first tenants were supposedly "friends" so I priced it under market, and they did mow the lawn and they didn't wreck it, but overall that was a mistake. They also left with like a weeks notice - but a empty house is better than ones with tenants that don't pay - ha.

I think the first thing you need to decide is what would you do with the money. Do you need the money, or do you have enough other investments to live comfortably. If they money will do you some good, then by all means part with it. But if you have no use for the money other than dump it in a T-bill - I personally think real estate is a great hedge against inflation.

If you do keep it - fix it up as needed for a rental - no custom kitches or such, and get a property manager. Yes, there are good and bad property managers so you do need to "manage" them. You should be the one to set the requirements on credit score and previous rental references. If not find a different one. The good thing about managers other than you getting to be being hands off is they generally command a higher rental rate than a individual owner.

good luck. Let us know what you do.

 

[doublebase]

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

Yeah, I’d say it’s a tenant friendly state, but the rental rates are high. In fifteen years the only rental problem I had was the tenant lost his job, and he payed me half the rent for six months. That was a mistake because he never really intended to get something else, and come to find out he was living the life anyway. I evicted him and spent the usual $5,000 in repairs/improvements, and had it rented within a couple months for $500 more a month. That’s usually the case, they’ll stay for 2-3 years, I won’t increase rent much (if at all), and then I’ll do a few repairs/upgrades and latch on with the current area rental market.

Right now I’m at $2,100. I’d raise it to $2,700 or so

 

[Vil_Riker]

Yeah, I’d say it’s a tenant friendly state, but the rental rates are high. In fifteen years the only rental problem I had was the tenant lost his job, and he payed me half the rent for six months. That was a mistake because he never really intended to get something else, and come to find out he was living the life anyway. I evicted him and spent the usual $5,000 in repairs/improvements, and had it rented within a couple months for $500 more a month. That’s usually the case, they’ll stay for 2-3 years, I won’t increase rent much (if at all), and then I’ll do a few repairs/upgrades and latch on with the current area rental market.

Right now I’m at $2,100. I’d raise it to $2,700 or so

Some due diligence up front works wonders during the lease.

 

[PandaBear]

This is not just a decision for return on investment but also your energy and effort. At your age and you not wanting to deal with it anymore, plus the risk of law changing and other reasons, I would say just sell it and invest in something more suitable for your age. Just don't be desperate and sell when the price is right.

Interest rate is not going down and the commercial market is not going up, I wouldn't wait.

 

[walterjay]

Listening to you I can tell that you are done with it. Monkey on your back. Sell asap.

 

[supton]

I'd sell, but that's risk-adverse me. IMO if I were to do the rental game, I'd want several. If one rental has a bad tenant, then I'm likely doing just fine with all my others. But if I have only one rental, then any problem feels much larger.

Sell and invest in a portfolio that matches your risk level. Maybe leave some in cash or CD's, then an index fund.

 

[The Critic]

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.

Agreed. Although I am fundamentally supportive of diversifying one's investments, the cap rates on SFD rentals has been poor in most MCOL and HCOL areas.

 

[SC Maintenance]

Agreed. Although I am fundamentally supportive of diversifying one's investments, the cap rates on SFD rentals has been poor in most MCOL and HCOL areas.

I would generally agree with you, however during the last high inflation rate era family homes were about the only thing that beat inflation in that decade, and the OP has already indicated he would have to pay a fair bit of cap gains, etc.

It really depends on his portfolio.

And of course what the government does about rental rules, etc.

The headache part can be offloaded to a manager - that is what they do. You pay for it, but if that is your biggest gripe, then that is what your paying for.

 

[K-Man]

Doublebase, sounds as though you've been lucky so far with tenants. All it takes is one nightmare tenant to tear up the place and cause $100,000+ in damage out of spite. Or you could see another rent moratorium during a future emergency.

You can expect screws to tighten even more on landlords anyway with changes in federal and state laws down the road we can't even predict.

As others here point out, contractors and costs of lumber and other supplies are more than you think. That kitchen and bathroom redo might cost $100,000 where the house is. Sell it and don't look back.

 

[doublebase]

Doublebase, sounds as though you've been lucky so far with tenants. All it takes is one nightmare tenant to tear up the place and cause $100,000+ in damage out of spite. Or you could see another rent moratorium during a future emergency.

You can expect screws to tighten even more on landlords anyway with changes in federal and state laws down the road we can't even predict.

As others here point out, contractors and costs of lumber and other supplies are more than you think. That kitchen and bathroom redo might cost $100,000 where the house is. Sell it and don't look back.

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.