Sell or rent out - DC row house

[Anonymous]

Hello,

We have a very nice row house in Petworth. It was completely redone when we bought it in 2017. We’ve had no issues and it’s been well maintained. We bought for around $800k with $200k down. Mortgage rate is 3%. We are looking at relocating internationally for 3 years. Not sure what to do about the house. Will likely come back to the area after. Have a young child now in parochial school. Hate our terrible next door neighbor. But love other neighbors and our house. Should we sell it? Rent it? All I ever hear is how awful being a landlord is in dc. I really dislike our neighbor. And a long term plan for school worries me. WWYD?

[Anonymous]

One thing to consider is if you sell and then come back - prices might have gone up in the meantime. We sold and moved away in 2021 and now everything is WAY more expensive. We might just have had bad timing. But sometimes I wish we kept that house and rented it.

[Anonymous]

I was going to say rent it until I read the part about the neighbor.

In that case I'd sell even if it's not the most advantageous financial decision. It's not necessarily a bad decision -- sell and put the proceeds in investments and you'll be fine. Even if prices continue to rise in DC you'll be able to buy again.

But a really bad neighbor sucks and it's actually worse if you're the landlord. Will they harass you tenants? Try to take advantage of your absence to encroach on your property or do things to their property that will create a nuisance? If you aren't there to address it immediately, it puts you on the backfoot.

I just would not want to deal with all that while I was abroad, so I'd sell. But I have experience with a really horrible neighbor so I'm very much speaking from that.

[Anonymous]

I'm selling my FCC house with a 2.5% mortgage because I hated the neighbor, lol.

But this year we have rented it out. I'd always told my DH I didn't ever want to become a landlord; I've heard too many horror stories. But aside from it being more work than I thought to get our tenants, we've had zero issues. We required min credit score of 740 for every adult who would be living in the house, and I think that controls for a lot.

But we will be selling due to tax considerations. The house appreciated a lot in value and you don't pay tax on the sale of a primary residence -- and after three years of renting it out we can no longer call it a primary residence for tax purposes. So given that we will want to sell it eventually anyway, we are going to go ahead and sell when our tenants move out after the end of their one year lease to make sure we avoid taxation on the appreciation. We did not use a management company, which you might need to if you are out of the county; and so be aware that when we looked into that we found that they charge you one month's rent to find a tenant, and then charge you another month's rent to manage the property. That would have cost us money rather than us making money, so we have dealt with all of that ourselves. But we are local, and my DH is great at home maitenance and can fix anything that comes up (and a couple of things have).

If I were you, and knew I were coming back in three years, I'd be inclined to keep it and rent it out so that you can move back in. But beware of that tax thing -- if you come back in 3 years and decide you want to live somewhere else and you sell, you could take a tax hit on any appreciation assuming there are no exceptions that apply to you.

[Anonymous]

You still have pat to tax on period your house was rented . So you can not get full 500 k exclusion .taxable gain will prorated on that 1 year you are renting out .

[Anonymous]

It sounds like you are less likely to move back in after you return to the states than you are to move elsewhere, due to the neighbor and the school issue. How old will your child be?

Between the school issue and the neighbor, I think it makes more sense to just cut and run. you'll make a nice profit (what are comps selling for) and can invest it while you are abroad, and then will be able to put down substantial more than 200k on a home when you return and will be able to choose the neighborhood based on your needs at the time. And you won't ever have to deal with that neighbor again.

[Anonymous]

DC heavily favors tenants and hates landlords. And to be a landlord out of the country to boot is asking for a headache.

[Anonymous]

Op here. Thanks for these thoughts so far. Child is almost 5 so would be 8 when we return. Neighbor is truly awful and I do feel unsafe living next to him, so I’d love to never see him again. I’d love to think he moves but he inherited the house after his mother died and has no incentive to leave (we’re hoping he just gets locked up but given dc doesn’t care about blatantly illegal behavior, seems unlikely). I am scared to be priced out if we sell and have to move farther out once we’re back. This is our first house so it feels like such a big decision.

[Anonymous]

Are you sure you'll be back? I hear people say this, but then another opportunity arises and they stay or end up going somewhere else or "come back", but schools/yard/crime push them into the 'burbs where they would have ended up anyway.

[Anonymous]

Sell. You do NOT want to be a landlord in DC, especially if you are living abroad. You would have to hire a property management company to deal with all the maintenance hassles---so that will cost you. You cannot refuse to rent to Section 8 so you could be subject to being part of that regulatory regime and run the risk of having your property trashed. It is impossible to evict a tenant for anything other than non-payment of rent. So tenants having their rent paid by government vouchers can trash your property and you have no recourse. And unless you are planning to come back and live in the property, if you rent it and then want to sell it, you have to (a) legally offer the tenant the right to buy it, which can tie you up for months and (b) have to show it for sale with the tenant in it, which means the property will show poorly.

[Anonymous]

If you invest the money well, it grows faster than housing prices in DMV.
If it makes it to a million, you can just have the the million pay your rent monthly and still grow.
Owning is not always what it's cracked up to be.

[Anonymous]

Rent it!! Here’s my amazing property manager: https://www.mainstayrentalsdc.com/

We’ve been renting for the last 18 months and have had NO issues. It’s all about finding the right tenants on the front end, and our property manager did that for us. He handles everything, and it has been amazing.

And in the 18 months we’ve been gone, the renters have paid more than $50K of our mortgage principal. Plus we get significant tax benefits. It has been great for us.

[Anonymous]

If you do rent it, I would advertise it offline to military officers on 3 year orders.

[Anonymous]

Anonymous wrote:Are you sure you'll be back? I hear people say this, but then another opportunity arises and they stay or end up going somewhere else or "come back", but schools/yard/crime push them into the 'burbs where they would have ended up anyway.

+1, btdt - the neighborhood won’t even feel the same to you after 3 years away.

[Anonymous]

Rent. Get an excellent property manager and have a 740 credit score for each adult in the home. Also, no pets.