Fascinating to hear a property owner’s side of the story. I rent and go around saying, “I wish all these people would sell their houses instead of renting them out, so I/other people could buy one.”
But assuming you could really get that 5.5% return, yes, I can see your point that renting it out would be your best financial option.
But there are a lot of ‘ifs’.
Several of them are mentioned in the comments thread of a Doctor Housing Bubble post:
1)”A simple issue such as someone flooding out your floor (it does happen) can wipe out an entire year (or more) of profits.”
2) If you get a bad tenant, it could take you 6 to 12 months to push them out.
3) How much of a bite out of your profits will the property tax bill take? My rule of thumb here in San Diego is “about $100/month for every $100,000 of assessed house value” (so about $700/month in your case, assuming the house is here in San Diego.)
4) The aforementioned management company at 8-10% will be taking up to $300/month on a $3,000 rent nut.
One of the commentors on the above Dr. HB thread, “chris” on October 1 at 11:08 am, said he has been a landlord for 13 years. He had a lot of interesting comments, mostly about properties with mortgages on them, and the following which seems also relevant to you:
5) “You should budget at least 3% for capital expenditures and improvements.”
So out of your $3,000 a month rent, I estimate you’d be taking home roughly $1910 of it, or about 3.5% annual return. That’s if nothing drastic happens, like the water heater blowing a gasket and flooding the house, or a Tenant From Hell, or something.
Still better than market interest rates; up to you and whatever veteran landlords you can find for advice, if you/they think it is less risky than the markets.
One piece of advice I’ve gotten from house-landlords: DO NOT try to rent out a house that is in another city/state!!! Unless you get angels for tenants this can be a real pain, he told me.
