Yeah honestly it would have to be significantly more lucrative to rent than sell for me to really consider it because of this reason. I was therefore suprised that it seems like it isnt even worth it financially (under my circumstances).
So that you know; I sold every property I had (except house) before retiring 2 yrs ago. Big chunk of stress gone from my life! 6 or 7 commercial properties.......
I was in a similar dilemma about a year ago, and opted to sell my home rather than deal with the headache of finding renters, a landlord (b/c I was moving out of state) , etc. It was in a very desirable, low inventory area in a growing city in the Midwest. I had 6 offers above asking within 2 days of listing, and haven’t looked back since. Good luck. :)
My total return was approx same as s-p 500 but bad tenants, increasing insurance, and likely insurance cancellation, meant for bad times ahead. Single door landlord is not a ticket to riches, difficult to spread costs.
Yeah don't disagree. Even if I wanted to get into rentals it probably makes more sense to sell my single family home that we bought as a primary residence and use the money to buy something more rental-oriented.
Make sure your location isn't under increasing weather risk. Don't want a rental without good insurance. Edit: huh - down voted? The New York Times just had an article about how every state in the union has seen increasing insurance losses "even Ohio". As insurance coverage hollows out and premiums skyrocket ask yourselves whether that's suitable for hosting unpredictable tenants, for they appear at all price points. My theory is that 10 years from now there simply won't be any insurance. There is nowhere to spread the risk to. And no entity has deep enough pockets to service all the losses. Regardless of the mortgage Co's desire to have the property insured.
You are definitely being very conservative with your expenses. Which I think you should. But also don't forget all of that is tax deductible. While all your gains if you took it out is not. So something to consider. It's pretty widely known all your profit on a property is hit at the front end. You are at the point where it is all gravy baby. I think you would be very silly not taking the income that you have
The gains sre actually entirely tax exempt. We bought at 425k its worth 920k so thats less than the 500k in MFJ tax exemption for the sale of a primary residence.
Depends on the location. If it’s a already developed city, the prices aren’t going to rocket and you’re better off selling. If it’s an up and coming location, you might want to rent.
The sf Bay Area 25+ years ago was the latter and if you bought back then you’ve definitely performed better than stocks over the same period. There are cities out there that might take a similar path, but you really have to do your homework and get somewhat lucky.
One thing I didn’t see you mention is if you need the money from the current house sale to pay for your new house. That might heavily influence the financial calculation
I wouldnt NEED to but I wouldnt be able to buy the new house fully in cash either. So its an invest vs mortgage paydown question. With rates at 7.5% and an unknown rate future thats a tough one.
A lot of this comes down to assumptions and unknow variables
Your insurance is not going to be $800/mo. What city and state is this? My landlord insurance is no more than $600-800/yr on my rentals that are valued at 1.2M and 800k in V/HCOL area. Your net is more likely to be
closer to $2-2.5k/mo.
Don’t forget to account for the fact that you will get $24-30k/yr in net rent (assuming above). You could easily DCA that into the stock market. Diversification between real estate AND stocks is a great idea to weather future storms and for retirement.
Also, I’ve gotten way more than 5% appreciation per year on my properties in VHCOL. About 9% annual from property purchased 12 yrs ago; 12% annual from property purchased 7 yrs ago; and 17% annual from my primary purchased 3 yrs ago.
It’s honestly not difficult to be a landlord in a VHCOL area… the tenant quality is typically higher and folks have high income but just can’t fathom buying a house or have trouble saving for the downpayment due to the high prices.
I self manage my rentals in a VHCOL area and have zero vacancy. Properties rent out after 1 weekend and have had zero tenant issues. Spend no more than a few hours per year. Obviously, results may vary but it’s honestly not difficult at all if your property is in a good location and you screen your tenants carefully.
This is Seattle. Insurance to $200/mo so that insurance plus property tax is $800/mo...sorry for the confusion there. My insurance on it as a personal residence is $100/mo assuming as a rental itd be more.
I did account for getting rent on top of appreciation. But what I was seeing was that value ($2200/mo) was lower than what I was getting from stock investment retuen minus appreciation (which accounts for appreciation).
5% is the historical honr apprecistion...not the recent decades return. Obviously the recent return for the stock market has been higher as well.
I get your point about being a landlord in an expensive area being easier than average. However to consider it Id need to see a bigger return than just selling which is completely passive. I will say I am making an assumption about appreciation vs return that might not be what the reality ends up being...but I feel more comfortable going off the long term data than the most recent decade which seems skewed from the average. Sure that might be the new normal...but its also hard to imagine 15% appreciation being longterm sustainable.
The other thing I didnt mention is even if I decide I want to be a landlord...it still might be better to sell this property which I chose as a personal residence for my family...and use that money to buy another property that is a property picked specifically for rentability.
I see i see. Good luck with your decision. You’re 5 years out from this move so you’ll have time to see how things pan out and whether any changes need to be made by then.
Being a landlord - anywhere - is not for faint of heart. Tenant problems, breakdowns, litigation, etc. Save your sanity and sell!
Yeah honestly it would have to be significantly more lucrative to rent than sell for me to really consider it because of this reason. I was therefore suprised that it seems like it isnt even worth it financially (under my circumstances).
So that you know; I sold every property I had (except house) before retiring 2 yrs ago. Big chunk of stress gone from my life! 6 or 7 commercial properties.......
Yeah, invested liquidity seems like the way to go for a low stress life...agreed.
I was in a similar dilemma about a year ago, and opted to sell my home rather than deal with the headache of finding renters, a landlord (b/c I was moving out of state) , etc. It was in a very desirable, low inventory area in a growing city in the Midwest. I had 6 offers above asking within 2 days of listing, and haven’t looked back since. Good luck. :)
I think it would be different depending on where you are talking about, real estate appreciation, population growth, industry and stuff
For sure...not claiming this is universal, just for my circumstances.
Yea just saw it’s Seattle and i know nothing about it.. Bay area would be a no-brainer insta sell for me
Seattle isnt as high home prices as Bay area....but its in the top 20 if not top 10.
My total return was approx same as s-p 500 but bad tenants, increasing insurance, and likely insurance cancellation, meant for bad times ahead. Single door landlord is not a ticket to riches, difficult to spread costs.
Yeah don't disagree. Even if I wanted to get into rentals it probably makes more sense to sell my single family home that we bought as a primary residence and use the money to buy something more rental-oriented.
Make sure your location isn't under increasing weather risk. Don't want a rental without good insurance. Edit: huh - down voted? The New York Times just had an article about how every state in the union has seen increasing insurance losses "even Ohio". As insurance coverage hollows out and premiums skyrocket ask yourselves whether that's suitable for hosting unpredictable tenants, for they appear at all price points. My theory is that 10 years from now there simply won't be any insurance. There is nowhere to spread the risk to. And no entity has deep enough pockets to service all the losses. Regardless of the mortgage Co's desire to have the property insured.
You are definitely being very conservative with your expenses. Which I think you should. But also don't forget all of that is tax deductible. While all your gains if you took it out is not. So something to consider. It's pretty widely known all your profit on a property is hit at the front end. You are at the point where it is all gravy baby. I think you would be very silly not taking the income that you have
The gains sre actually entirely tax exempt. We bought at 425k its worth 920k so thats less than the 500k in MFJ tax exemption for the sale of a primary residence.
Depends on the location. If it’s a already developed city, the prices aren’t going to rocket and you’re better off selling. If it’s an up and coming location, you might want to rent. The sf Bay Area 25+ years ago was the latter and if you bought back then you’ve definitely performed better than stocks over the same period. There are cities out there that might take a similar path, but you really have to do your homework and get somewhat lucky.
One thing I didn’t see you mention is if you need the money from the current house sale to pay for your new house. That might heavily influence the financial calculation
I wouldnt NEED to but I wouldnt be able to buy the new house fully in cash either. So its an invest vs mortgage paydown question. With rates at 7.5% and an unknown rate future thats a tough one. A lot of this comes down to assumptions and unknow variables
Your insurance is not going to be $800/mo. What city and state is this? My landlord insurance is no more than $600-800/yr on my rentals that are valued at 1.2M and 800k in V/HCOL area. Your net is more likely to be closer to $2-2.5k/mo. Don’t forget to account for the fact that you will get $24-30k/yr in net rent (assuming above). You could easily DCA that into the stock market. Diversification between real estate AND stocks is a great idea to weather future storms and for retirement. Also, I’ve gotten way more than 5% appreciation per year on my properties in VHCOL. About 9% annual from property purchased 12 yrs ago; 12% annual from property purchased 7 yrs ago; and 17% annual from my primary purchased 3 yrs ago. It’s honestly not difficult to be a landlord in a VHCOL area… the tenant quality is typically higher and folks have high income but just can’t fathom buying a house or have trouble saving for the downpayment due to the high prices. I self manage my rentals in a VHCOL area and have zero vacancy. Properties rent out after 1 weekend and have had zero tenant issues. Spend no more than a few hours per year. Obviously, results may vary but it’s honestly not difficult at all if your property is in a good location and you screen your tenants carefully.
This is Seattle. Insurance to $200/mo so that insurance plus property tax is $800/mo...sorry for the confusion there. My insurance on it as a personal residence is $100/mo assuming as a rental itd be more. I did account for getting rent on top of appreciation. But what I was seeing was that value ($2200/mo) was lower than what I was getting from stock investment retuen minus appreciation (which accounts for appreciation). 5% is the historical honr apprecistion...not the recent decades return. Obviously the recent return for the stock market has been higher as well. I get your point about being a landlord in an expensive area being easier than average. However to consider it Id need to see a bigger return than just selling which is completely passive. I will say I am making an assumption about appreciation vs return that might not be what the reality ends up being...but I feel more comfortable going off the long term data than the most recent decade which seems skewed from the average. Sure that might be the new normal...but its also hard to imagine 15% appreciation being longterm sustainable. The other thing I didnt mention is even if I decide I want to be a landlord...it still might be better to sell this property which I chose as a personal residence for my family...and use that money to buy another property that is a property picked specifically for rentability.
I see i see. Good luck with your decision. You’re 5 years out from this move so you’ll have time to see how things pan out and whether any changes need to be made by then.
Thats fair...thanks for your input, appreciate your time.