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Every damn time.
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Subject Expert
Is that $100 to $200 in cashflow after saving for vacancy, maintenance, and CapEx? Or just $100 to $200 over your PITI?
If it’s the first, you need to weigh whether holding off for a few years is worth the potential appreciation and principal paydown. Remember that you’ll lose your homestead exemption in 3 years, so if you plan to hold it longer than that, you’ll need to start accounting for the LTCG you would pay.
Generally speaking, it sounds like you’d barely be breaking even on rent, and appreciation doesn’t sound like it’s sky high. I’d sell it and move on.
Coach
I'd probably hold on to it, personally. I don't think you've really worked through the math properly, which you must do first. Your profit per year isn't your cash flow. It's your cash PLUS the equity portion of your mortgage payments PLUS appreciation MINUS the interest and tax portions of you mortgage payments, any HOA fees, upkeep costs, landlord insurance, and any other utilities you would cover. You'll have to do the math, and compare that with a roughly 10% annual gain on any stock investment you would make as an alternative.
Mentor
Sell it
Depends on goal and level of risk (and work) you’re willing to take.
I recommend writing out a pros and cons sheet and see if it’s really worth it. I don’t remember all the pros and cons but top of my head:
Pros - renting will build you wealth in terms of of equity but it’s highly inaccessible (aka you have to sell or mortgage it out to take cash out). In theory later in life it could become an income stream and be a good way to diversify your investments. The beauty of this is, someone else is paying for it via rent.
Cons - what if they don’t pay? What if stuff breaks? Who will do the maintenance or do you now need to keep plumber, electrician, and contractor on your speed dial and have extra savings or deal with headache yourself? What if you wish your mortgage on your new house is lower?
The short message here is, it’s a risk and a reward. If you can stomach the ups and downs it’s a nice asset but if you can’t you might want to sell and just put money into a S&P fund.
Cheers mate.
Never sell, inherit it to your children for full value step up.
If you rent it out, consider the taxes you’ll owe on that income as well.
Subject Expert
Taxes on rental income is usually pretty low due to depreciation expense.
I would keep it. Those rates will not come any time soon
If you can sell it and avoid being taxed on the gain I’d sell and use that money to invest in something that’ll cash flow a little more than $100 a month. Consider it a better return on hassle.
We are airbnb’ing my wife’s house and in the next 10 months or so will be selling it. This is after we’ve put ~5k of work into it and it’s only that low because we already had furniture. Had we sold last summer we’d have a nice bit of investment principal growing that much longer. Obviously the house is increasing in value but we could’ve invested in something that’d actually make more money.
We break even+ because ADR is capped b/c of our area. Factor in the hassle.. yikes.
If you have lived in it 2 out of the last 5 Years you can sell without paying any taxes on the gain, so I wouldn’t underestimate the value in that.
If you’re really only making a few hundred dollars a month (assuming this doesn’t set aside much for vacancies or major repairs) you’re probably actually break even at best.
If you’re not interested/passionate about real estate investing, I’d say you’re better off selling and putting the money in a mutual fund.
Keep
For sure keep and not even a question
I would keep it . You have done the heavy lifting to acquire it, and it is currently paying for itself. Consider opening a HELOC in case you are cutting it close on the expenses. Also, consider using a property manager. Yes, they charge fees. However, collecting the monies, coordinating the repairs, preparing the financials for tax season, and managing the lease may well be worth it. Only use established managers with sizable portfolios. The smaller, or one-man, companies may be more inclined to incur costs so that they get more fees.
Selling will have costs as will placing the proceeds (i.e., buying something else) so your net will likely be smaller than what your pencil may be showing you.
This is not professional advice, and I don't know your situation, but I would keep the house based on my interpretation of your situation as you have described it.
Best of luck to you.