Reply to Should I sell my house or rent it out?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]First of all, it’s not wise to have half of your net worth tied up in such an illiquid investment. In the best of times, it takes months to liquidate a house, and if the market slows down, it could take years.

Also, make sure you look at all the tax implications of renting, including how depreciation recapture works. Also the impact of losing the capital gains tax exemption, if the house has appreciated since you purchased it.

FWIW, I inherited several rental properties in a hot real estate market and, after doing the math on all the expenses (maintenance, taxes, insurance, management fees, business license, etc), and then add in the loss of tax basis through depreciation, it didn’t pencil out as investment vs. the stock market. [b]You can buy a CD now that has over 5% interest, and you don’t have to hassle with renters. 
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It looked to me like rental real estate is a good investment IF you are highly leveraged AND in a market that is appreciating, and could cover all of your expenses, including mortgage, with the rent. That worked much better when you could get a sub 3% interest rate. [/quote]

A CD has a limit on how much you can invest.  If her house is paid off she will be way over FDIC ins limits and will have to maintain multiple accounts in multiple institutions and roll them over when they mature, and they may not mature into high rate environment years later.  Rates for high yield saving accts also fluctuate.  If she buys long term CD her money isn't liquid either, in fact if she needs it, she will have to wait many months to get access just the same as if she puts RE for sale.   Yes, it's a good idea if you don't have hundreds of thousands to invest and you really do not need this money.  It's one of the diversification vehicles if you invest elsewhere too. But it's not necessarily *better* in an of itself [/quote]

So you spread the CDs across a few different banks to get FDIC insurance.  Easy to do---been doing it for 15+ years. 
To access a CD you typically only pay 2-3 months interest as a penalty.  So it is essentially liquid.  I highly recommend putting money into 10 (single acct) or 20 (joint acct) $25K CDs at each bank, that way if you need to access some extra cash, you only cash in the CDs that you need, not a full $250K or $500K (on a joint account).  Sure it may not mature into the same current 5%, but it could be higher.  
Fact is the market largely will do better over time with less hassle than majority of real estate market.  My MD home (Ellicott City, top schools) might have finally doubled in value in 21 years, and that is after a new kitchen ($90K), new roof, new hardwood floors/ripping out carpet, new HVAC, 3 new H2O heaters, etc.  So take away the maintenance costs/imporvements of almost $200K and it has not actually doubled.  
That money would have about tripled in value over the last 20 years in the S&P500 index....with a lot less stress/work required.

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You don't realize that market riding up in the last 20 years does not guarantee this will continue? Everything went up last 20 years and we have inflation eat up most of our "appreciation" in RE and also a lot of what steady low risk funds had provided.  I had been allocating my 401 rather conservatively and still lost some years.  There were periods I had allocated everything to cash or MM because market wasn't performing as well.  I don't see my investments in the market doubling, or I really suck at it, which is much more common for majority of people vs. being good at it.  RE doesn't double necessarily either depending on the area.  In some areas prices shot up 3x while in others they remained the same if only barely keeping up with inflation. There is no guarantee investing one way or another, it's really up to what you are comfortable doing.  With OPs situation it is also about whether relocation is permanent or not.  Diff decision depending on future plans. [/quote]

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