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Thread: To rent or to sell?

  1. #1
    God/dess Lena's Avatar
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    Default To rent or to sell?

    I'm leaving here and I can't decide whether I should rent or sell this place. I'd always planned on renting it, but...
    1 - My neighbors hate me. Ever since my girlfriend moved in they call the police on me for everything: grass being too high, dogs supposedly running loose, dogs supposedly barking, grass being too high, etc. While I'm here I'm generally able to document that these things aren't true and usually prevent myself from being fined... but if I'm not here (ie, I'm in alaska, "here" is pennsylvania) and they continue to pick on me it could be more of a problem.
    2 - I think this place will need new roofing in a couple years... the water pump is cantankerous and needs coddling... do I want to deal with these things from the other side of the country? OTOH, I could get a rental agency to handle these things for me?

    So I thought maybe I should sell, but...
    1 - I really would like to have the income from renting it, even if it wasn't much (I own it).
    2 - It doesn't seem like a good time to sell... I want to wait for the big city to creep a little closer...
    3 - Being the non-verifiable income person that I am, and not really being inclined to get a "real job" anytime soon, I'd like to keep it to be able to use it as collateral for the land that I want to buy in a year or so... but then, if I sold it I could just pay cash for that... but if it was rented I could let the rent make the payments on that...

    Thoughts? Advice? Experiences?



  2. #2
    Senior Member DanMorris95156's Avatar
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    Default Re: To rent or to sell?

    Lena,

    You are asking the right questions and there are a number of options available. Although a SW thread isn't the best place for specifics - here are some additional thoughts - for what they are worth.....


    1)What is the FMV of the home in PA? What is your best estimate for near term (5 years or less) appreciation? (effectively - how quickly is that big city pressuring land values?)
    2) What is the rental value of the property today and what are the associated expenses (what cash flow would expect before and after taxes {income taxes and remember you might benefit from rental losses against your ordinary income}.
    3) What is your cost basis in the property (e.g. how much tax might you pay if you sell after it is a rental versus primary residence?
    4)What will the Property management cost you?

    Comments - owning rental property is a great long-term hedge and investment in that it provides passive cash flows without eating into your assets value. A debt-free rental is even better in that if the world crashes you have no real cash flow challenges relative to that property. Owning rental property even a county away can be a royal Pain - a country away is worse. The pyshcological costs can outweigh the benefits. A personal choice.

    I don't know you.....but my bias is to hold the property for rental as you make future decisions - remember there is a 3 year window to sell and avoid most capital gains taxes (not all).

    You may contact me for further thoughts,

    Kindest regards,

    Dan
    Daniel D. Morris, CPA
    [email protected]

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    Default Re: To rent or to sell?

    If you own it free and clear - I would keep it . Like you said rent it out with a property mngmt co. Since you are waiting for the rite oppurtunity to sell and make the most off of your investment . Rentals can be a hassle though as you know but a good PM team will make most of your worries go away.Can you afford to keep it without putting added stress on your finances as a rental can sometimes need repairs( which you can write off on taxes) . Also it gives you a place to move back into and live in for a couple of years and possibly avoid some capital gains taxes . Just my thoughts it seems like you cant go wrong in most cases with real estate .

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    Banned Melonie's Avatar
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    Default Re: To rent or to sell?

    I vote take the money while you can still get it, and run ...

    Leave the risks of bad tenants stealing and selling your copper pipes. rising real estate taxes, repairing the roof and water pump etc., as well as taking a loss on future resale value, for the NEW owner to worry about !

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    God/dess VenusGoddess's Avatar
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    Default Re: To rent or to sell?

    ^ Of course, at the same time, this would be reflected in what you can sell the house for. If the FMV is (hypothetical) $200,000 and you need a new roof and new water pump. The buyers can request a drop in sale price of $20-30,000. If you own the house free and clear, then this could be good...I mean, you'd still walk away with $170-180,000.

    I've found that the best way to "rent" a property and avoid the pitfalls of renting to people is do a "lease to own". MOST tenants who will have "stake" in the property will take better care of the property if they know it will benefit them.

    How much time do you have before you make a decision? There are a lot of scenarios you can visit...but it's going to take some research time.

    BTW...as for your neighbors...having new tenants move in may alleviate the problems. If the problems continue, just have your new tenants keep a nice log of what is going on...just as you did.

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    God/dess leilanicandy's Avatar
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    Default Re: To rent or to sell?

    I will sell it seems that you have bery picky neighbors. What if the they do not like the tenants you rent too! What are you going to kick them out and find new tenants. Just sell it!
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    Veteran Member TarynJolie's Avatar
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    Default Re: To rent or to sell?

    As someone who is selling their current home & suffering through the worst re-sell market in 9 years( or so I have heard) I would have to advise you to rent for now rather than sell. We had our first showing in 3 WEEKS today. Very frustrating.

    We are going out west as of May 15th come hell or high water and are now considering renting out our current home and buying a second home out there.

    Our current house isn't even two years old. It is in the mid to upper price range for our area and is in model home condition so we don't want to sell for lower than the house is worth and that is what the market is forcing alot of folks to do right now.

    On a positive note our property value went up 100 grand in the time we have owned it.

    It is amazing how quickly things can change too. 6 months ago homes in my area were selling in 30-60 days at the full asking price.

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