Real Estate Investment Decision - Rental or Sell
Real Estate Investment Decision - Rental or Sell
Hi Bogleheads,
I am new member to the site and I am looking for some feedback on a Rental. I am purely looking this from Return perspective to either Sell or keep Renting:
1) House is in Ahwatukee/Phoenix, AZ and Paid Off - 2003 built and about 4000 sq.ft - paid $350K
2) With current craziness in housing market - Value ~$750K (Last year it was about $550K pre Covid around March 2020).
3) I will net about $700k after all transaction costs
4) I have been renting for about 3 years for $3K and now rents are about $3.5K and might go higher to $3.8 to $4K in future based on current trend.
5) After HOA, Taxes, Insurance ,net etc....assume 3K net per month or $3.5K in near future if trend continues
6) If I sell now, I will be also in $500K exclusion window
Question - AZ markets continues to be hot as well as stock market. With cash flow of $36K to $42K / year, Is it wise to keep renting or Invest somewhere else for better returns?
I am little nervous to invest in stock market now. What would be good investment choice if I have sell the Rental?
Thanks for reading and appreciate the feedback.
I am new member to the site and I am looking for some feedback on a Rental. I am purely looking this from Return perspective to either Sell or keep Renting:
1) House is in Ahwatukee/Phoenix, AZ and Paid Off - 2003 built and about 4000 sq.ft - paid $350K
2) With current craziness in housing market - Value ~$750K (Last year it was about $550K pre Covid around March 2020).
3) I will net about $700k after all transaction costs
4) I have been renting for about 3 years for $3K and now rents are about $3.5K and might go higher to $3.8 to $4K in future based on current trend.
5) After HOA, Taxes, Insurance ,net etc....assume 3K net per month or $3.5K in near future if trend continues
6) If I sell now, I will be also in $500K exclusion window
Question - AZ markets continues to be hot as well as stock market. With cash flow of $36K to $42K / year, Is it wise to keep renting or Invest somewhere else for better returns?
I am little nervous to invest in stock market now. What would be good investment choice if I have sell the Rental?
Thanks for reading and appreciate the feedback.
Re: Real Estate Investment Decision - Rental or Sell
The bolded part is the one that makes the deal for me. $500k tax free is very hard to pass up.nward wrote: ↑Tue Jun 22, 2021 8:07 pm Hi Bogleheads,
I am new member to the site and I am looking for some feedback on a Rental. I am purely looking this from Return perspective to either Sell or keep Renting:
1) House is in Ahwatukee/Phoenix, AZ and Paid Off - 2003 built and about 4000 sq.ft - paid $350K
2) With current craziness in housing market - Value ~$750K (Last year it was about $550K pre Covid around March 2020).
3) I will net about $700k after all transaction costs
4) I have been renting for about 3 years for $3K and now rents are about $3.5K and might go higher to $3.8 to $4K in future based on current trend.
5) After HOA, Taxes, Insurance ,net etc....assume 3K net per month or $3.5K in near future if trend continues
6) If I sell now, I will be also in $500K exclusion window
Question - AZ markets continues to be hot as well as stock market. With cash flow of $36K to $42K / year, Is it wise to keep renting or Invest somewhere else for better returns?
I am little nervous to invest in stock market now. What would be good investment choice if I have sell the Rental?
Thanks for reading and appreciate the feedback.
There are many risks associated with rental real estate. This is a great time to get out and into stocks.
Do not get me wrong here, I am a real estate investor, but the tax free 500k (check with your accountant about recapture taxation) is a powerful incentive.
Answering a question is easy -- asking the right question is the hard part.
Re: Real Estate Investment Decision - Rental or Sell
Welcome to the forum!
Ask yourself just one question: If you did not own this home, would you spend $700,000 in cash to purchase this home and turn it into a rental? If not, sell it (quick - we are past the "Covid" peak here, number of offers per property is coming down).
I would separate the investment decision from the buy-sell decision. Focus on whether or not you would spend $700K to become a landlord.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Re: Real Estate Investment Decision - Rental or Sell
I’d sell because I don’t want yo be a landlord. I also think you are getting a good price and have the 500k exclusion.
"I started with nothing and I still have most of it left."
Re: Real Estate Investment Decision - Rental or Sell
Ahwatukee here also. It is nuts for sure. I would sell in this market.be done and take the money.nward wrote: ↑Tue Jun 22, 2021 8:07 pm Hi Bogleheads,
I am new member to the site and I am looking for some feedback on a Rental. I am purely looking this from Return perspective to either Sell or keep Renting:
1) House is in Ahwatukee/Phoenix, AZ and Paid Off - 2003 built and about 4000 sq.ft - paid $350K
2) With current craziness in housing market - Value ~$750K (Last year it was about $550K pre Covid around March 2020).
3) I will net about $700k after all transaction costs
4) I have been renting for about 3 years for $3K and now rents are about $3.5K and might go higher to $3.8 to $4K in future based on current trend.
5) After HOA, Taxes, Insurance ,net etc....assume 3K net per month or $3.5K in near future if trend continues
6) If I sell now, I will be also in $500K exclusion window
Question - AZ markets continues to be hot as well as stock market. With cash flow of $36K to $42K / year, Is it wise to keep renting or Invest somewhere else for better returns?
I am little nervous to invest in stock market now. What would be good investment choice if I have sell the Rental?
Thanks for reading and appreciate the feedback.
Marty....don't go to the year 2020....Dr. Emmett Brown
Re: Real Estate Investment Decision - Rental or Sell
As a rental, those numbers are awful.
Look around the neighborhood, are most of the homes rented out?
Expensive single-family rental homes are almost always a bad deal for the owner.
Absolutely don't miss out on the $500k exclusion.
Look around the neighborhood, are most of the homes rented out?
Expensive single-family rental homes are almost always a bad deal for the owner.
Absolutely don't miss out on the $500k exclusion.
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- unclescrooge
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- Joined: Thu Jun 07, 2012 7:00 pm
Re: Real Estate Investment Decision - Rental or Sell
Are you guys suggesting that RE prices will come down?
I thought nobody knows nothing applies to both RE and stocks
I thought nobody knows nothing applies to both RE and stocks
Re: Real Estate Investment Decision - Rental or Sell
Sell, because it's tax free gain and you don't look like a seasoned landlord. And if you want exposure to real estate you could buy some REITs or homebuilders.
The sillier the market’s behavior, the greater the opportunity for the business like investor.
- unclescrooge
- Posts: 6265
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Re: Real Estate Investment Decision - Rental or Sell
Based on his numbers the ROE is pretty low. As an investment the returns are unappealing.
Also, see this link:
viewtopic.php?t=253203
"Jack Bogle himself says he sold his stocks in year 2000 because valuations did not make any sense to him in those years. "
Re: Real Estate Investment Decision - Rental or Sell
Easy sell. The tax exclusion is huge and it's a horrible rental rate vs its value (you should already know this).
Re: Real Estate Investment Decision - Rental or Sell
Taking a quick look at available rentals in PHX, here is a small single-family house that rents for almost $2 per square foot per month. This is a much more viable rental than OP's house.
https://www.zillow.com/homedetails/2807 ... 2370_zpid/
The OP's house would rent for less than $1 per square foot per month.
https://www.zillow.com/homedetails/2807 ... 2370_zpid/
The OP's house would rent for less than $1 per square foot per month.
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Re: Real Estate Investment Decision - Rental or Sell
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Last edited by BogleFan510 on Fri Jul 09, 2021 5:33 pm, edited 1 time in total.
Re: Real Estate Investment Decision - Rental or Sell
Thank you...I know $500K exclusion is key here. Would you still sell if there was no exclusion in terms of ROI and future appreciation?CurlyDave wrote: ↑Tue Jun 22, 2021 8:37 pmThe bolded part is the one that makes the deal for me. $500k tax free is very hard to pass up.nward wrote: ↑Tue Jun 22, 2021 8:07 pm Hi Bogleheads,
I am new member to the site and I am looking for some feedback on a Rental. I am purely looking this from Return perspective to either Sell or keep Renting:
1) House is in Ahwatukee/Phoenix, AZ and Paid Off - 2003 built and about 4000 sq.ft - paid $350K
2) With current craziness in housing market - Value ~$750K (Last year it was about $550K pre Covid around March 2020).
3) I will net about $700k after all transaction costs
4) I have been renting for about 3 years for $3K and now rents are about $3.5K and might go higher to $3.8 to $4K in future based on current trend.
5) After HOA, Taxes, Insurance ,net etc....assume 3K net per month or $3.5K in near future if trend continues
6) If I sell now, I will be also in $500K exclusion window
Question - AZ markets continues to be hot as well as stock market. With cash flow of $36K to $42K / year, Is it wise to keep renting or Invest somewhere else for better returns?
I am little nervous to invest in stock market now. What would be good investment choice if I have sell the Rental?
Thanks for reading and appreciate the feedback.
There are many risks associated with rental real estate. This is a great time to get out and into stocks.
Do not get me wrong here, I am a real estate investor, but the tax free 500k (check with your accountant about recapture taxation) is a powerful incentive.
Re: Real Estate Investment Decision - Rental or Sell
Thank you...I know $500K exclusion is key here. Would you still sell if there was no exclusion in terms of ROI and future appreciation?CurlyDave wrote: ↑Tue Jun 22, 2021 8:37 pmThe bolded part is the one that makes the deal for me. $500k tax free is very hard to pass up.nward wrote: ↑Tue Jun 22, 2021 8:07 pm Hi Bogleheads,
I am new member to the site and I am looking for some feedback on a Rental. I am purely looking this from Return perspective to either Sell or keep Renting:
1) House is in Ahwatukee/Phoenix, AZ and Paid Off - 2003 built and about 4000 sq.ft - paid $350K
2) With current craziness in housing market - Value ~$750K (Last year it was about $550K pre Covid around March 2020).
3) I will net about $700k after all transaction costs
4) I have been renting for about 3 years for $3K and now rents are about $3.5K and might go higher to $3.8 to $4K in future based on current trend.
5) After HOA, Taxes, Insurance ,net etc....assume 3K net per month or $3.5K in near future if trend continues
6) If I sell now, I will be also in $500K exclusion window
Question - AZ markets continues to be hot as well as stock market. With cash flow of $36K to $42K / year, Is it wise to keep renting or Invest somewhere else for better returns?
I am little nervous to invest in stock market now. What would be good investment choice if I have sell the Rental?
Thanks for reading and appreciate the feedback.
There are many risks associated with rental real estate. This is a great time to get out and into stocks.
Do not get me wrong here, I am a real estate investor, but the tax free 500k (check with your accountant about recapture taxation) is a powerful incentive.
Re: Real Estate Investment Decision - Rental or Sell
I completely agree on renting $700K home. However in good neighborhoods, $500K now seems like a norm for even a smaller home.David Jay wrote: ↑Tue Jun 22, 2021 8:43 pm Welcome to the forum!Ask yourself just one question: If you did not own this home, would you spend $700,000 in cash to purchase this home and turn it into a rental? If not, sell it (quick - we are past the "Covid" peak here, number of offers per property is coming down).I would separate the investment decision from the buy-sell decision. Focus on whether or not you would spend $700K to become a landlord.
Re: Real Estate Investment Decision - Rental or Sell
Thank you for the feedback. What should be rent @ $700K where you will still continue to Rent?
Re: Real Estate Investment Decision - Rental or Sell
The old adage was that monthly rent should be 1% of property's value. I wouldn't be interested in this property if making less than 0.8%, or $5,600 per month. Problem is, nobody will rent at that price. People with that kind of income/net worth typically buy instead. That's why expensive single-family homes aren't good rentals.
To make money in the landlord business-- use leverage to buy nearby cheap single- or multi-family properties, manage yourself, raise rents aggressively, and do minimal maintenance. But factor in your time and risk.
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