Rent out house or just sell and cash out?
- Thread starter Dubbington
- Start date
Don't forget if the housing market keeps going up that house will go up in value and now his property is worth more so you also have to factor in that gain for your calculations. Also if it tanks well then you have to take that into account also.
Killroy1999
Well-known member
Rent it out, I say. Use the tenants money to pay off your mortgage and expenses.
From the 2020 investment thread, the passive income in retirement is really nice. Lots to tax write offs. You can use your home equity and get a HELOC easy.
If you dont wan't to deal with tenants, then hire a property manager for ~8% of the rental income. I have property managers managed a number of units that I have out of state. The rental property investments have paid off better than my investments in the stock market.
From the 2020 investment thread, the passive income in retirement is really nice. Lots to tax write offs. You can use your home equity and get a HELOC easy.
If you dont wan't to deal with tenants, then hire a property manager for ~8% of the rental income. I have property managers managed a number of units that I have out of state. The rental property investments have paid off better than my investments in the stock market.
Last edited:
Alan_Hepburn
Well-known member
That what we're doing. When my in-laws passed away their house was inherited by my wife and her sister. We bought out her sister's share and our son and his family moved in. They pay us rent every month, that pays the mortgage, taxes, insurance, and some extra to cover repairs, etc. Well below market value but everyone is happy.
But that's changing this year, with Prop 19. To minimize, as much as possible, the impact that Prop 19 will have on future tax increases we are gifting 50% of the house to our son, and setting up an LLC which will own the house, and our son and we will be co-owners of the LLC. Our attorney suggested this to minimize future tax issues, both property tax and inheritance tax when THAT time comes. Anybody thinking of doing this - you have until Feb 15th to get it done; after that Prop 19 takes over...
gnahc79
Fear me!
Run the numbers all you want, the hours and stress associated with renting out your townhouse is more important. Make sure both you and the mrs are on board with whatever you decide 100%. It's going to take both of you to make it work if you decide to do it.
-You have young kiddos (1 or 2 kids? I forgot)
-You have to maintain the townhouse, either $$$ to have a professional do it or X hours if you want to do it yourself to save money
-You will have keeping both a mortgage and your monthly rent in the back of your mind each day.
-Your townhouse has a mortgage, so keeping it occupied is a priority
-You're trying to find brand new tenants during a pandemic when there's a significant tech exodus out of CA. The ones that are staying...IMO most already own a home or looking to buy.
Paying a property management company will reduce stress significantly. It costs $$$ though.
Did I read that right? The townhouse won't be paid off until 30yrs from now?
-You have young kiddos (1 or 2 kids? I forgot)
-You have to maintain the townhouse, either $$$ to have a professional do it or X hours if you want to do it yourself to save money
-You will have keeping both a mortgage and your monthly rent in the back of your mind each day.
-Your townhouse has a mortgage, so keeping it occupied is a priority
-You're trying to find brand new tenants during a pandemic when there's a significant tech exodus out of CA. The ones that are staying...IMO most already own a home or looking to buy.
Paying a property management company will reduce stress significantly. It costs $$$ though.
Did I read that right? The townhouse won't be paid off until 30yrs from now?
msethhunter
Well-known member
You'll get good money right now with interest rates what they are.
Option #1: Sell it, rent for the next year and reassess.
Option #2: Take out some equity, buy the house you're looking to rent, use the income from the rental to pay off the equity loan.
Always view property as income generation.
Option #1: Sell it, rent for the next year and reassess.
Option #2: Take out some equity, buy the house you're looking to rent, use the income from the rental to pay off the equity loan.
Always view property as income generation.
Eldritch
is insensitive
Everyone keeps saying this, but it simply is not true a lot of the time. This would be true if he was buying NEW property to rent. Dude has been in the deal 11 years. I don't know what is numbers are on the deal, but it is 100% possible that he could collecting collect rent at 150-300% of his bank note right now.
Anyone who thinks that is not a great asset to manage just doesn't understand money and how it works. If I had to guess, since it is a condo, there is probably an annually increasing HOA that will eat most of the cash flow out of the deal, so maybe it isn't worth keeping, but you honestly need to run a proforma on the deal to see what the real benefit is and if it is worth it.
I mean honestly, money is so cheap right now, depending on his note, it may be worth it to refi the whole thing at a sustainable DSCR, take the extra cash to add to the principal payments on the new place and use the rental income on the condo to just maintain that asset while he is investing out of personal income for the new place.
Really, until you run a proforma and figure out your NOI, you can't really be sure.
littlebeast
get it while it's easy
we stuck with our original home and built up a lot of equity over the years. just bought a second home up in the mountains. we’re gonna take 9-12 months going back and forth between the two, and then make a permanent move up there. when we do, we’ll sell our home in the BA and pay off both mortgages. as low as both mortgages are, we could sell it at 1/2 it’s current value and still be able to do that. early retirement FTMFW!
have zero interest in renting anything out, regardless of how attractive it may seem. just don’t want to get involved in anyone else’s shit (literally lol).
have zero interest in renting anything out, regardless of how attractive it may seem. just don’t want to get involved in anyone else’s shit (literally lol).
Blankpage
alien
Easily earn up to %20 per year, sign me up. Where do I find this easy investment.
scootergmc
old and slow
Averaging 20% is going to be near impossible in a single fund, but there are plenty doing 10-15% since inception (over 25 years).
afm199
Well-known member
Dubbington
Slamdunk Champion
NOI and Cap Rate are interesting. If I use purchase price or my new refi loan amount and 2.625% interest rate, the cap rate is 8%. If I use current value of the home, $800,000k, the cap rate is low, 3%, based on what the rent is brining in.
GAJ
Well-known member
DannoXYZ
Well-known member
Simplistic and similar assertion is stock-market will always go up as well. And go up much higher and faster than housing-market. Look at chart of historical performance above, you'll see if you bought in 2007 at peak, it'll take you 10-yrs just to break even on house. But you're still negative because inflation will have cut your purchasing-power by 33%.
A house is not an investment, but place to live. So keep housing costs low < 20-25% of income and put more money away in faster-appreciating instruments. I prefer pyramid allocation scheme:
5% options on futures: S&P minis, soybeans, coffee, hard winter-wheat, now adding silver
5-15% options on stocks
10-20% growth stocks
15-25% stable stocks
15-25% funds/ETF
15-25% housing
20-30% insurance
30-40% cash
That's true diversification, using different asset-classes, rather than picking variety of same.
Last edited:
DannoXYZ
Well-known member
Not single-fund, you can't be that lazy. No such thing as easy money, you have to do your research and be active with your money. Just like old '60s broken jalopy you find in garages. It's depreciating asset, get rid of it and it's much more useful as cash. Same thing with anywhere you park your money. Key is education and learning new strategies that fit modern market.
Investment mentality of masses is still stuck in '60s. Regulatory-changes in 1986 provides A LOT more flexibility and opens up HUGE opportunities in new and novel strategies. Look at both sides of GME/AMC debacle and you'll see awesome new weapons being deployed that simply wasn't possible in the '60s.
Anyway, I must be getting old as I'm pushing conservative strategies with tax-benefits. Never would've even looked at those years ago. Ok, so roth-IRA is nice. Using CAN-SLIM method from O'neil @ IBD, you can do quite well. I started roth-IRA last year since I was maxed-out in roth-401k. I'm up about +93% for 2020. Most people's magical 10% done in single day.
Adding some contributions for 2021, lowers it to +65%, and I still have 11-months to go.
Last edited:
DannoXYZ
Well-known member
BTW - Most people know value of insurance, when your bike gets hit or stolen, when house catches fire, falls down in earthquake. There's also insurance for investments and it's saved my hide many times. Most people put all their eggs into one basket betting on upside be-it savings-account, house or investments. You can buy insurance to protect downside movements and at least preserve your purchasing-power as market drops.
Which... is coming... Massive draw-downs in multiple markets. Retail-sales, stocks, housing, etc. Unemployment and bankruptcies on rise, it's gonna get worse before it gets better. Damn... never thought I'd be prepper either...
Which... is coming... Massive draw-downs in multiple markets. Retail-sales, stocks, housing, etc. Unemployment and bankruptcies on rise, it's gonna get worse before it gets better. Damn... never thought I'd be prepper either...
Last edited:
Eldritch
is insensitive
Sure, and a proforma is hard to draft for long term in the bay area due to so many crazy and unpredictable price increases, (including rent, and potentially taxes nowadays) but you can tinker with your Replacement Reserve contributions and make an informed decision on how much risk you want to take on.
People just trying to run from the property and just dump it into the market are just trying to sell you something though. Like I said earlier, I expected the HOA costs to kill most the value of the rental property aspect, but maybe it reduces your reserve contributions enough to maybe balance out. Depends on what the agreement covers and costs.