Should we sell our DC rental?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would sell because of how you phrased this: "We had to pump $30k into it due to delayed renter maintenance and it will take time to recoup that in rent profits."

Did you expect your renters to maintain the property? They didn't delay the maintenance -- you did. And this 30k you've spent on delayed maintenance is not some unforeseen expense. Maintenance should be built into your business costs as a landlord such that you should have already been "recouping" the costs of that maintenance all along through the rent.

You don't understand what it means to be a landlord or to own an investment property. You should be maintaining the property all along and charging a rental fee that covers maintenance costs as they occur instead of letting it fall into disrepair and suddenly having to fix it all at once between tenants. It sounds like you live out of state and don't employ a management company for the rental.

Sell it.

I think it is you who does not "understand what it means to be a landlord or to own an investment property."

Who maintains the property, with regard to any particular maintenance, can be covered by the lease. And it is not unheard of for tenants to have maintenance duties.

While that can be true in some cases, the tenant bias in DC landlord-tenant law makes these provisions all but unenforceable. You can write it into the lease, but if your tenant does none of the agreed upon maintenance, good luck either suing them to do it or evicting them -- either way you will lose more in attorney's fees than if you just did it yourself.

There are situations where tenant-assigned maintenance can work, but obviously is OP got to the point where they needed 30k in "deferred maintenance," this wasn't one of them. Especially if OP is renting from another state and doesn't have a management company who checks in on the property and deals with the tenant, it's just not going to work here.

If "Op is renting from another state" and does not have a management company here, then odds are that pretty much nothing is "going to work here," let alone tenant maintenance duties.

[Anonymous]

I have a similar situation where I will face prohibitive capital gains taxes if I sell. My plan? I am relatively old. I plan to hold until death, making a modest amount of income in the meantime. I have told my heirs to sell it upon my death, when basis will increase to market value as of my death date = no taxes on sale.

[Anonymous]

Anonymous wrote:I have a similar situation where I will face prohibitive capital gains taxes if I sell. My plan? I am relatively old. I plan to hold until death, making a modest amount of income in the meantime. I have told my heirs to sell it upon my death, when basis will increase to market value as of my death date = no taxes on sale.

Well, yeah ... focusing on the step-up in basis is a great idea if you are 1) on death's door and 2) don't need the money yourself

[Anonymous]

Yeah that phrase "delayed renter maintenance" also stood out to me. It's of course delayed landlord maintenance.

It sounds like you are likely renting at below market rates likely because the house hasn't been in great condition either. You're also likely not getting the greatest tenants, either.

If you updated the property you could likely greatly increase the rent you've been bringing in, but it sounds like you don't have the funds to invest in that. So I agree with others saying it would be best to sell. But the biggest caveat here is whether you have tenants currently living in the property. DC makes it very difficult to evict them if they aren't willing to leave on their own. And selling a property with tenants in place would mean you're giving up a lot of the potential sales price. A savvy investor is going to see a lot of deferred maintenance as an opportunity to buy at a lower price.

Your best bet would be to put it on the market after tenants move out. If that isn't happening you could raise the rent, which might prompt them to move, but follow the letter of the law on how much you are able to raise the rent legally. If the tenants are staying the smartest move would be to wait them out while giving reasonable rent increases in the meantime. There's nothing like a lowball rental rate to make them want to stay forever, no matter the condition of the property.

[Anonymous]

I would have sold long ago. I sold several properties to buy stocks. No maintenance, no fees to speak of, and I control what I buy or sell and when. Made 4% already on a stock I bought yesterday in a tax free account.

[Anonymous]

I would sell. Renting out property in DC can be a total money-losing headache if you end up with not-great tenants. Simplify your life and reduce the risk.

[Anonymous]

Anonymous wrote:OP - do you have a tenant in the rental now?

This is OP - my tenant just moved out.

And the $30k is for things like new paint. Tenant did some terrible paint jobs and yes, we are taking it out of security deposit, but it’s not enough to cover a full repainting. Obviously we fix things as they come up while we have tenants.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP - do you have a tenant in the rental now?

This is OP - my tenant just moved out.

And the $30k is for things like new paint. Tenant did some terrible paint jobs and yes, we are taking it out of security deposit, but it’s not enough to cover a full repainting. Obviously we fix things as they come up while we have tenants.

How in the world is repainting a rowhouse $30k?

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP - do you have a tenant in the rental now?

This is OP - my tenant just moved out.

And the $30k is for things like new paint. Tenant did some terrible paint jobs and yes, we are taking it out of security deposit, but it’s not enough to cover a full repainting. Obviously we fix things as they come up while we have tenants.

Do you have a local management company? What are you clearing annually after mortgage and maintenance/management costs?

[Anonymous]

Being a landlord in DC is almost always an unwise financial decision.* The returns just can’t equal an S&P index fund. And that’s before you even address the headaches involved.

Unless we are talking multi-unit properties…

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP - do you have a tenant in the rental now?

This is OP - my tenant just moved out.

And the $30k is for things like new paint. Tenant did some terrible paint jobs and yes, we are taking it out of security deposit, but it’s not enough to cover a full repainting. Obviously we fix things as they come up while we have tenants.

How in the world is repainting a rowhouse $30k?

It definitely isn't.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP - do you have a tenant in the rental now?

This is OP - my tenant just moved out.

And the $30k is for things like new paint. Tenant did some terrible paint jobs and yes, we are taking it out of security deposit, but it’s not enough to cover a full repainting. Obviously we fix things as they come up while we have tenants.

If you are fixing things as they come up, you should never have a 30k outlay between tenants. Repainting, replacing carpet or treating hardwoods, replacing any worn-out appliances with renter-grade appliances, and maybe a few other odds and ends really should not be costing you more than maybe 10k and that's only with recent inflationary pricing and assuming a reasonably big row house.

We rent out a 2 bedroom, 1 bathroom row house (just 700 sq ft) and to do the above between tenants only costs around 2.5k, tops, and that's only if we don't do any of it ourselves and assuming a tenant who has been there a while (we don't do the floors or replace appliances unless we need to, we always repaint and get our handyman in there to fix any other issues). We also spend about $600/yr on regular maintenance now -- landscaping for the tiny front yard during warm months and annual maintenance of HVAC, washer/dryer, gutter and roof. Every few years we will also spend a bit more to make repairs to the back patio (replacing bricks, fixing any loose boards in the fence, etc.) and front walkway.

But this is all built into our budget. We bought this place for 300k back when you could do that in DC, we have a 30 yr mortgage that is really small. We rent out for $2200/mo and have been very fortunate with our tenants. We are clearing about 15k/yr right now plus the house has doubled in value since we bought it.

You need to do this math for yourself and figure out if it makes sense. If you are not local, you absolutely need a management company who can respond to urgent maintenance requests and look in on the property periodically. But just pencil it out and it should be fairly obvious whether it make sense to keep it or not.

Oh and also if you decide to keep it but are worried about getting a longterm tenant in there in case you want to sell it next year or the year after, I recommend seeing if you can get people people stationed in DC temporarily. Some realtors and management companies are known to work with foreign service and embassy workers, especially if the home is somewhere that is appealing to that population (mostly close in or nicer parts of NW or maybe Cap Hill/Navy Yard for some) so listing with one of them could help you get renters who are unlikely to stay more than a year or two. Bonus, these tend to be great renters who don't abuse the home and are receiving a housing stipend so you never have to worry about them missing rent or paying late, and they always use professional packers and movers who are easier to deal with.

[Anonymous]

This is OP, I really appreciate all the advice! We don’t use a management company because we live in VA so it’s not that far away.

It’s interesting to hear from many of you that the DC rental property scene doesn’t make a lot of sense. It’s true… we’ve had this house for 15y (lived there for some of it) and would have made more money in the stock market versus rental.

I had always envisioned this as a long term play. Once the mortgage is paid off (10 more years) then we will really be making money and that should coincide with retirement. So the thought was to hang on and then this would become a passive income stream later.

[Anonymous]

Anonymous wrote:This is OP, I really appreciate all the advice! We don’t use a management company because we live in VA so it’s not that far away.

It’s interesting to hear from many of you that the DC rental property scene doesn’t make a lot of sense. It’s true… we’ve had this house for 15y (lived there for some of it) and would have made more money in the stock market versus rental.

I had always envisioned this as a long term play. Once the mortgage is paid off (10 more years) then we will really be making money and that should coincide with retirement. So the thought was to hang on and then this would become a passive income stream later.

Real estate is never passive. Sell now and move on.

[Anonymous]

Sell. All it takes is one squatter and you're done for. My friends got a squatter that they knew personally. It happens even in hugh end rentals and DC doesn't protect you. They'll never see the 30K they lost on that.