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

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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. 
[/b]
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]

Some misconceptions here. As an executor, I had millions in estate cash (from the sale of rental property, FWIW) that had to be invested in FDIC insured vehicles, and CDs were the easiest way to do this. My bank handled buying and holding multiple CDs from different banks, each under the FDIC limit. I just had to be careful not to buy from the banks where the estate already had accounts. Also, CDs can also be sold before they mature.  [/quote]

THIS^^^^
It is not that difficult to manage CDs and having full FDIC insurance, especially given most of the best rates come from Online banks. And yes, CDs can easily be sold before they mature with anywhere from a 1 month to 3 month penalty in interest lost[/quote]

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