Rent or Sell

[nwswoop]

I have a house that used to be my personal residence, that I have been renting out for the last 2 years. The house would probably sell for $170,000 to $180,000. I owe $46,000 on the mortgage at 5.5%. The house has rented quickly each time I've listed it, but we got little response when we briefly tried to sell it two years ago. My question is should we continue to rent the house or are we better off selling it? We currenly get $1000/month, which covers the mortgage payment. The house will be paid off in 6 years at the rate we are paying. The rental rate is somewhat low for a 4br. 3bath house. We have had no problems with tenants, and the house has required little maintenance. Any suggestions about how we should think about this would be helpful. I currently own two other houses outright that rent to the company I own. I live in another house I own with a partner in a real estate holding company, so am not in need of the funds to purchase another house. I think of the houses as a potential source of retirement income, or something to sell when the housing market recovers. Thanks for any input.

[dannin]

I would suggest that you hold onto the house and continue to rent. It's not a great time to sell.

If your house will be paid off in 6 years then you're putting ~$650 a month towards the $46,000 mortgage. You have approximately $110,000 - $120,000 in the house. ( $170,000 to $180,000 - 6% real estate commission to sell it - $46,000 you owe ). This means you are getting about a 6.5% return on your investment not including any appreciation you may see if ( and that is a big "if" ) the real estate market recovers and begins going up again.

That is really not a bad return on your money. Especially, as you mention the rent is a little low and you may be able to list it for a little more to increase your return.

The flip side though, without knowing what your other retirement prospects are you might not want all of your capital invested in real estate. If these are your main sources of investment for retirement, then you may consider pulling the cash out and diversifying a little. Just something to think about.

[cschin4]

If you currently have good tenants and are doing fine financially otherwise, then you may just want to let it ride. But, it depends on what you want. If you don't mind being a landlord then keep it. However, if it is on your mind and you dont' want to be bothered or it is a thorn in your side or you simply just want to be done with it, then sell it.

[isralexba]

Hi,

I think that since we are currently in a serious low in terms of real estate prices, i would wait with the sell and keep paying off the mortgage from your rent payments.

This way, when the market rebounds (and it will) you will see your house selling for a lot more than 180K$. This is all true unless you need the money right now (but this was not my impression)
Cheers.
Alex

[Homebody]

You sound as though you probably already have more real estate investment experience than the rest of us, so what does your gut/experience say?

[nwswoop]

Thanks for the input. My gut says hold the property. The rental causes less anxiety for me than worrying about how else to invest the money. Our retirement picture is heavily weighted to real estate, with about $200,000 in IRA's, currently contributing close to $20,000/year to those. I'm 54, wife is 49, so plan to keep working a while. Other propert worth close to $800,000, and is used by our business to generate revenue, rental and otherwise. I have an inherent faith in solid tangible assets versus financial ones, and do like that I can provide an affordable house to a family with a dog, while still having it make financial sense. If an offer came my way, or a tenant was interested in purchasing the house, I would seriously consider it. Likewise, if another obvious investment opportunity came up, or we needed the money to build a place, I would sell. Otherwise, what we are doing is working for now. Last time I listed the house on craigs list, my phone rang 20 minutes later, and had close to 100 people interested, so the chances of the property sitting empty seem remote. At some point, the time will be right to sell, but this doesn't seem like the time.

[Homebody]

There see I told you so! (That your gut was already telling you).

[BlackDiamond]

Definately keep renting.