Sell or Rent out?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Speaking as an accidental landlord, I say just sell. In my case, this was a property I was living in so I renovated to my tastes. However, I over-renovated for the area and would not have gotten back what I put in if I sold. I have been renting it out ever since (8 years) and have basically regretted every minute of it.

Mind you, I've had great, high-income tenants who never missed a single payment. It's still a pain. And now, I'll probably never sell because I'd have to give back all the depreciation tax benefits -- those "tax advantages" aren't so great unless you never sell.

Overall, the only thing I like about the rental is that it's a place to put a big chunk of money that provides steady income and minimizes my freakouts when the stock market is down. But becoming a landlord is still my one and only financial regret.

I don't know anyone who was happy with the choice to rent out their home and become a landlord.

Being a competent landlord/real estate investor isn't rocket science, but it does require effort and some skills that you don't acquire overnight. If you have a crappy work ethic and fixing the brakes on your car is a daunting task, being a landlord isn't for you.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Assuming your question is a financial one...

Assume you net $300k on the sale.

You'll receive $26,400 in rent.

You'll owe $5k in taxes. Assume you'll need to pay $3k in expense per year. And assume you'll have 0% vacancy rate.

You'll net about $18k/year on an asset you could net $300k if sold. That's a 6% cash on cash return under ideal circumstances.

Or you can get a 5%+ return by parking the $300k in short term treasuries -- risk free and no hassle of being a landlord.

Or you can get more than that in other marketable investments.

Sell it.

Your return calculations don't include appreciation on the property. If the property appreciates at 3% a year, then the return is boosted to 9%.

Note, however, that if you decide to rent the property out, and you do so for more than 2 years, then if you eventually sell the property you will have to pay tax on the capital gains. In contrast, if you were to sell the property now, and then buy a new primary residence, you would be exempt from capital gains. This is an important consideration.

Can't she move back to the house for another 2 years and make it her personal residence again and then sell and avoid this capital gains tax? I don't think it's that unusual. People move away for 2 years for work overseas or if military, rent out their primary home, which becomes a rental, then return back and occupy it again. If they decide to sell are they really going to be paying capital gains if they had a history of it being a rental?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Speaking as an accidental landlord, I say just sell. In my case, this was a property I was living in so I renovated to my tastes. However, I over-renovated for the area and would not have gotten back what I put in if I sold. I have been renting it out ever since (8 years) and have basically regretted every minute of it.

Mind you, I've had great, high-income tenants who never missed a single payment. It's still a pain. And now, I'll probably never sell because I'd have to give back all the depreciation tax benefits -- those "tax advantages" aren't so great unless you never sell.

Overall, the only thing I like about the rental is that it's a place to put a big chunk of money that provides steady income and minimizes my freakouts when the stock market is down. But becoming a landlord is still my one and only financial regret.

I don't know anyone who was happy with the choice to rent out their home and become a landlord.

Being a competent landlord/real estate investor isn't rocket science, but it does require effort and some skills that you don't acquire overnight. If you have a crappy work ethic and fixing the brakes on your car is a daunting task, being a landlord isn't for you.

+1 Also, I don't want to be a landlord. If I'm traveling and something happens, I don't want to be in Europe for a month and having to make sure my tenants HVAC is urgently fixed in January. So I'd hire a management company, and if you do that, then you are paying 10% of rent for them to manage. Cutting into your profits. Being a landlord is a lot of work. If you enjoy it great. I'd prefer to just invest my money in the market and reap the returns without any extra work required

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We are in a similar position and will be renting our home out. The house has a 2% mortgage and is inside the beltway walking distance from a Metro stop in a highly desirable school pyramid. We are going to hang on to it.

Not thrilled about becoming a landlord, but we have the skills and time to do it.

Do you have a separate fund for repairs on the rental home? Tenants are much more damaging to homes than owner occupants usually. Landlords can only recoup so much from tenants. Most of them are broke and tenant protections mean that you as the owner are on the hook for most of what they break. FYI.

I just had a tenant move out and do well over 10k worth of damage to the property but all I could do was withhold most of the security deposit. It happens sometimes. You need to be prepared for that liability if you want to be a landlord.

Plus, even with good/decent tenants, most are not going to notice issues in the early stages. Once they tell you something is wrong, there might be water damage/major issues. Whereas if you were living there, you'd notice the slightest issue and address it before the issues compound.

In my experience, when tenants do damage and know they are responsible, they live with the damage, never say a word about it, and only mention it if it is noticed in the final walk through. The deliberate sabotage tenants are the worst. Good tenants can turn bad when they are notified that their lease will not be renewed. Even fraudulent. It’s a liability. Very few people think about these risks before they rent out their homes.

Yup! More bad tenants out there than good. Most who have caused hidden damages are not going to fess up.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Speaking as an accidental landlord, I say just sell. In my case, this was a property I was living in so I renovated to my tastes. However, I over-renovated for the area and would not have gotten back what I put in if I sold. I have been renting it out ever since (8 years) and have basically regretted every minute of it.

Mind you, I've had great, high-income tenants who never missed a single payment. It's still a pain. And now, I'll probably never sell because I'd have to give back all the depreciation tax benefits -- those "tax advantages" aren't so great unless you never sell.

Overall, the only thing I like about the rental is that it's a place to put a big chunk of money that provides steady income and minimizes my freakouts when the stock market is down. But becoming a landlord is still my one and only financial regret.

I don't know anyone who was happy with the choice to rent out their home and become a landlord.

Being a competent landlord/real estate investor isn't rocket science, but it does require effort and some skills that you don't acquire overnight. If you have a crappy work ethic and fixing the brakes on your car is a daunting task, being a landlord isn't for you.

+1 Also, I don't want to be a landlord. If I'm traveling and something happens, I don't want to be in Europe for a month and having to make sure my tenants HVAC is urgently fixed in January. So I'd hire a management company, and if you do that, then you are paying 10% of rent for them to manage. Cutting into your profits. Being a landlord is a lot of work. If you enjoy it great. I'd prefer to just invest my money in the market and reap the returns without any extra work required

How do you reap returns without any extra work in the market and without taking risk? If you want anything above 10% return you'd have to be actively investing, even beyond 5%.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We are in a similar position and will be renting our home out. The house has a 2% mortgage and is inside the beltway walking distance from a Metro stop in a highly desirable school pyramid. We are going to hang on to it.

Not thrilled about becoming a landlord, but we have the skills and time to do it.

Do you have a separate fund for repairs on the rental home? Tenants are much more damaging to homes than owner occupants usually. Landlords can only recoup so much from tenants. Most of them are broke and tenant protections mean that you as the owner are on the hook for most of what they break. FYI.

I just had a tenant move out and do well over 10k worth of damage to the property but all I could do was withhold most of the security deposit. It happens sometimes. You need to be prepared for that liability if you want to be a landlord.

Plus, even with good/decent tenants, most are not going to notice issues in the early stages. Once they tell you something is wrong, there might be water damage/major issues. Whereas if you were living there, you'd notice the slightest issue and address it before the issues compound.

In my experience, when tenants do damage and know they are responsible, they live with the damage, never say a word about it, and only mention it if it is noticed in the final walk through. The deliberate sabotage tenants are the worst. Good tenants can turn bad when they are notified that their lease will not be renewed. Even fraudulent. It’s a liability. Very few people think about these risks before they rent out their homes.

Yup! More bad tenants out there than good. Most who have caused hidden damages are not going to fess up.

Not if you know what you're doing.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Speaking as an accidental landlord, I say just sell. In my case, this was a property I was living in so I renovated to my tastes. However, I over-renovated for the area and would not have gotten back what I put in if I sold. I have been renting it out ever since (8 years) and have basically regretted every minute of it.

Mind you, I've had great, high-income tenants who never missed a single payment. It's still a pain. And now, I'll probably never sell because I'd have to give back all the depreciation tax benefits -- those "tax advantages" aren't so great unless you never sell.

Overall, the only thing I like about the rental is that it's a place to put a big chunk of money that provides steady income and minimizes my freakouts when the stock market is down. But becoming a landlord is still my one and only financial regret.

I don't know anyone who was happy with the choice to rent out their home and become a landlord.

Being a competent landlord/real estate investor isn't rocket science, but it does require effort and some skills that you don't acquire overnight. If you have a crappy work ethic and fixing the brakes on your car is a daunting task, being a landlord isn't for you.

+1 Also, I don't want to be a landlord. If I'm traveling and something happens, I don't want to be in Europe for a month and having to make sure my tenants HVAC is urgently fixed in January. So I'd hire a management company, and if you do that, then you are paying 10% of rent for them to manage. Cutting into your profits. Being a landlord is a lot of work. If you enjoy it great. I'd prefer to just invest my money in the market and reap the returns without any extra work required

How do you reap returns without any extra work in the market and without taking risk? If you want anything above 10% return you'd have to be actively investing, even beyond 5%.

+1
They are reaping returns, just less returns.