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  • rent or sell?

    Hello,

    would like to seek your opinion. We have been thinking of buying a bigger house. Is it better to rent or sell and use the money for downpayment for a newer house?



    current house paid off

    Examples : If current house zestimate: 327000 and rent zestimate : 1900
    new house approx 600,000 ( not found yet, thats the max budget), downpayment 20% without selling the current house.

    appreciation for current house: living in > 5 years, $ 60,000

    Is it better to rent or sell? Is there a calculator?

    I looked at the amortization schedule if the first house is sold and used towards payment of the new house, it appears the monthly interest payment will go down by $ 400

    1: I understand the tax implications of selling later , I guess if it is sold after 2 years.
    2: I understand that I will have to pay monthly $ 400 for property taxes, $ 60 for insurance and some for maintenance( I don't know how much?). house is 15 years old.
    3: Am I correct in assuming the depreciation will reduce the tax owed to minimum?

    It is very easy to rent or sell in our current neighborhood, houses don't last in market for more than 1 week.

    I believe that many in forum have rental properties, please advise.

    Thank you


  • #2
    Do you want to be a landlord?

    Comment


    • #3
      The first question you need to ask yourself is if you even want to be a landlord. If that answer is no then you've just simplified this entire process.

      Comment


      • #4
        Originally posted by pierre View Post
        Do you want to be a landlord?
        Yes, if we make money

        Comment


        • #5
          Better question is, if you wanted to be a landlord would this be an investment property you would choose?

          The numbers you listed suggest it’s not a great rental—would vote for selling

          Comment


          • #6
            Bigger pockets is a Forum for rental real estate that has been mentioned here. One rule of thumb is the 1% rule. Full disclosure, this is “short cut” , not a hard and fast rule. That says sell the house.
            https://www.biggerpockets.com/member...u-need-to-know
            I think you are underestimating the costs of ownership substantially. Property manager or are you going to rent it and maintain?
            Sweat equity or hire repairs? At a minimum sweat equity in running the numbers with vacancy for things needed for the next potential tenant.
            Compare what you think it would make as a rental to the alternative. It is a capital allocation.
            Rental property, new house or investment.

            Comment


            • #7
              Originally posted by uksho View Post

              Yes, if we make money
              What if you profit $10 a month for 10 hours of work/month? You've got to want to be a landlord.

              Comment


              • #8
                selling a place right now that we lived in 15 years ago and have been renting out since then. The depreciation recapture and the capital gains on the property we have to pay (if we don't do a 1031) are pretty brutal. I suggest taking the money out of the house and doing something else with it to avoid paying taxes on it.

                Comment


                • #9
                  Originally posted by CordMcNally View Post

                  What if you profit $10 a month for 10 hours of work/month? You've got to want to be a landlord.
                  I have not made the decision either way, that’s why I m asking . I will be happy to sell as well.
                  if if I keep 10% of rent for maintenance, I am still looking at 7-800/ month. Obviously , I understand the headache of being landlord and the other potential problems
                  that’s why was looking for people who have done it .
                  and I am not going in for repairs because I can’t do it . We will need to pay for those.

                  Comment


                  • #10
                    Originally posted by uksho View Post

                    I have not made the decision either way, that’s why I m asking . I will be happy to sell as well.
                    if if I keep 10% of rent for maintenance, I am still looking at 7-800/ month. Obviously , I understand the headache of being landlord and the other potential problems
                    that’s why was looking for people who have done it .
                    and I am not going in for repairs because I can’t do it . We will need to pay for those.
                    Looks like I was calculating it wrong , I think it’s better to sell

                    Comment


                    • #11
                      Originally posted by uksho View Post

                      I have not made the decision either way, that’s why I m asking . I will be happy to sell as well.
                      if if I keep 10% of rent for maintenance, I am still looking at 7-800/ month. Obviously , I understand the headache of being landlord and the other potential problems
                      that’s why was looking for people who have done it .
                      and I am not going in for repairs because I can’t do it . We will need to pay for those.
                      So, $9600 annual return?
                      Sales price $327k net of $300k.
                      $9.6K/$300k= 3.2% return
                      What else would you use the money for? The point is YOU have to run the numbers or you do not want to have a rental property.

                      On your house, it sounds like you need to dig deep to find out if the numbers make sense.

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