sell current home or rent? not sure how to calculate

[Anonymous]

Submitted by FormerSanDiegan on March 28, 2008 – 10:00am.

So, fast forward about 6 years … AT that point you will have a property that is likely to be breaking even or slightly positive cash flow. Your tenants will be paying it off over the next 20-25 years. All that for the equivalent of a monthly payment on a new car for the next 6 years.
Of course, I am assuming that rents increase at 3-4% per year and that we are not entering the next great depression.
The real question is whether or not you are suited to be a property owner or whether you might be better off selling and investing the 600 bucks a month in something else.

The problem I see is that you bought at peak. To reiterate the above in regards to being a landlord, a lot of times it’s not all it’s cracked up to be. My landlord got a taste of that when he acted irresponsibly when dealing with me as a tenant.

To his credit, he had attempted to sell me the house when he realized the direction the market was headed. However, as prices plummeted, he found he had to keep the house or lose his downpayment. Still, he should have sold as he cannot afford the property. Howeer, his biggest mistake was to double-cross me, which proved a very costly mistake for him. The jewel is he can’t do anything about it.

How does that saying go about a woman scorned?…

😉

The point is, you bought a rental property at peak, your first mistake. Second, being a landlord is sometimes akin to opening a can of worms. I’d sell now.

Disclaimer: I’m not an expert on the market, this is my personal opinion.

[jimcav]

i did not find any homes in 92106 or 92103 at 12x rents, but i read several threads here that said that is what prices should be (10-12x). i think actually there are some prices in that range, but not where we want to live. we bought early enough and with enough down in MD that we are okay renting it, and the location is attractive to several good demographics of renters. as you note, we are timed exactly wrong with our WA house. so i guess it is time to not throw good money after bad and sell it.
thanks
jim

[jimcav]

i did not find any homes in 92106 or 92103 at 12x rents, but i read several threads here that said that is what prices should be (10-12x). i think actually there are some prices in that range, but not where we want to live. we bought early enough and with enough down in MD that we are okay renting it, and the location is attractive to several good demographics of renters. as you note, we are timed exactly wrong with our WA house. so i guess it is time to not throw good money after bad and sell it.
thanks
jim

[jimcav]

i did not find any homes in 92106 or 92103 at 12x rents, but i read several threads here that said that is what prices should be (10-12x). i think actually there are some prices in that range, but not where we want to live. we bought early enough and with enough down in MD that we are okay renting it, and the location is attractive to several good demographics of renters. as you note, we are timed exactly wrong with our WA house. so i guess it is time to not throw good money after bad and sell it.
thanks
jim

[jimcav]

i did not find any homes in 92106 or 92103 at 12x rents, but i read several threads here that said that is what prices should be (10-12x). i think actually there are some prices in that range, but not where we want to live. we bought early enough and with enough down in MD that we are okay renting it, and the location is attractive to several good demographics of renters. as you note, we are timed exactly wrong with our WA house. so i guess it is time to not throw good money after bad and sell it.
thanks
jim

[jimcav]

i did not find any homes in 92106 or 92103 at 12x rents, but i read several threads here that said that is what prices should be (10-12x). i think actually there are some prices in that range, but not where we want to live. we bought early enough and with enough down in MD that we are okay renting it, and the location is attractive to several good demographics of renters. as you note, we are timed exactly wrong with our WA house. so i guess it is time to not throw good money after bad and sell it.
thanks
jim

[Anonymous]

I am currently faced with a similar situation. I am trying decide to sell my house, or rent it. Both have costs, and benefits. For me, either choice will be at a loss, but which is the bigger loss?

Suppose I can sell it at $50k below my purchase price, or rent by chipping in $200/mo – (negatively geared – generally a bad investment) Loosing at that rate, it would take 250 months, or nearly 21 years to loose $50k. In that time, surely, there will be an up-turn in the economy, and I’ll be able to sell at a price much closer to my original purchase price? If not, I’ll probably be too old to care anyway. Perhaps $200 is dreaming, and it my contribution is actually $500/mo. well then that’s still over 8 years to see those same losses.

If I sell, I lose it now. End of story. If I rent, I probably loose it, slowly, over a much longer period. But, I buy myself time until I have to sell. If I can sell for my original purchase price, sometime before 8 or 21 years (see above), then I loose less then $50k. In fact, with luck, I might even recoup all the costs if I can stay in the game long enough, and the market corrects enough. But, note that after 8 years, I’d need to sell for my purchase price + $50 to break even. There is some rent paid equity in the mix. Of course, if the economy never recovers, I will loose big time.

Is this a sensible risk under the circumstances?

[Anonymous]

I am currently faced with a similar situation. I am trying decide to sell my house, or rent it. Both have costs, and benefits. For me, either choice will be at a loss, but which is the bigger loss?

Suppose I can sell it at $50k below my purchase price, or rent by chipping in $200/mo – (negatively geared – generally a bad investment) Loosing at that rate, it would take 250 months, or nearly 21 years to loose $50k. In that time, surely, there will be an up-turn in the economy, and I’ll be able to sell at a price much closer to my original purchase price? If not, I’ll probably be too old to care anyway. Perhaps $200 is dreaming, and it my contribution is actually $500/mo. well then that’s still over 8 years to see those same losses.

If I sell, I lose it now. End of story. If I rent, I probably loose it, slowly, over a much longer period. But, I buy myself time until I have to sell. If I can sell for my original purchase price, sometime before 8 or 21 years (see above), then I loose less then $50k. In fact, with luck, I might even recoup all the costs if I can stay in the game long enough, and the market corrects enough. But, note that after 8 years, I’d need to sell for my purchase price + $50 to break even. There is some rent paid equity in the mix. Of course, if the economy never recovers, I will loose big time.

Is this a sensible risk under the circumstances?

[Anonymous]

I am currently faced with a similar situation. I am trying decide to sell my house, or rent it. Both have costs, and benefits. For me, either choice will be at a loss, but which is the bigger loss?

Suppose I can sell it at $50k below my purchase price, or rent by chipping in $200/mo – (negatively geared – generally a bad investment) Loosing at that rate, it would take 250 months, or nearly 21 years to loose $50k. In that time, surely, there will be an up-turn in the economy, and I’ll be able to sell at a price much closer to my original purchase price? If not, I’ll probably be too old to care anyway. Perhaps $200 is dreaming, and it my contribution is actually $500/mo. well then that’s still over 8 years to see those same losses.

If I sell, I lose it now. End of story. If I rent, I probably loose it, slowly, over a much longer period. But, I buy myself time until I have to sell. If I can sell for my original purchase price, sometime before 8 or 21 years (see above), then I loose less then $50k. In fact, with luck, I might even recoup all the costs if I can stay in the game long enough, and the market corrects enough. But, note that after 8 years, I’d need to sell for my purchase price + $50 to break even. There is some rent paid equity in the mix. Of course, if the economy never recovers, I will loose big time.

Is this a sensible risk under the circumstances?

[Anonymous]

I am currently faced with a similar situation. I am trying decide to sell my house, or rent it. Both have costs, and benefits. For me, either choice will be at a loss, but which is the bigger loss?

Suppose I can sell it at $50k below my purchase price, or rent by chipping in $200/mo – (negatively geared – generally a bad investment) Loosing at that rate, it would take 250 months, or nearly 21 years to loose $50k. In that time, surely, there will be an up-turn in the economy, and I’ll be able to sell at a price much closer to my original purchase price? If not, I’ll probably be too old to care anyway. Perhaps $200 is dreaming, and it my contribution is actually $500/mo. well then that’s still over 8 years to see those same losses.

If I sell, I lose it now. End of story. If I rent, I probably loose it, slowly, over a much longer period. But, I buy myself time until I have to sell. If I can sell for my original purchase price, sometime before 8 or 21 years (see above), then I loose less then $50k. In fact, with luck, I might even recoup all the costs if I can stay in the game long enough, and the market corrects enough. But, note that after 8 years, I’d need to sell for my purchase price + $50 to break even. There is some rent paid equity in the mix. Of course, if the economy never recovers, I will loose big time.

Is this a sensible risk under the circumstances?

[Anonymous]

I am currently faced with a similar situation. I am trying decide to sell my house, or rent it. Both have costs, and benefits. For me, either choice will be at a loss, but which is the bigger loss?

Suppose I can sell it at $50k below my purchase price, or rent by chipping in $200/mo – (negatively geared – generally a bad investment) Loosing at that rate, it would take 250 months, or nearly 21 years to loose $50k. In that time, surely, there will be an up-turn in the economy, and I’ll be able to sell at a price much closer to my original purchase price? If not, I’ll probably be too old to care anyway. Perhaps $200 is dreaming, and it my contribution is actually $500/mo. well then that’s still over 8 years to see those same losses.

If I sell, I lose it now. End of story. If I rent, I probably loose it, slowly, over a much longer period. But, I buy myself time until I have to sell. If I can sell for my original purchase price, sometime before 8 or 21 years (see above), then I loose less then $50k. In fact, with luck, I might even recoup all the costs if I can stay in the game long enough, and the market corrects enough. But, note that after 8 years, I’d need to sell for my purchase price + $50 to break even. There is some rent paid equity in the mix. Of course, if the economy never recovers, I will loose big time.

Is this a sensible risk under the circumstances?

[Diego Mamani]

Hard to say anything without more info.
1. The $50K you’d lose today, what % is that of the price you paid?
2. What % equity do you have in the house?
3. Is your mortgage for 30 yrs? Fixed rate?
4. How many years left in your mortgage?
5. The $200 monthly loss, is that after subtracting PITI only from the rent? Or do you also include an allowance for reserves, maintenance, operating expenses (other than PITI), and vacancies?

[Diego Mamani]

Hard to say anything without more info.
1. The $50K you’d lose today, what % is that of the price you paid?
2. What % equity do you have in the house?
3. Is your mortgage for 30 yrs? Fixed rate?
4. How many years left in your mortgage?
5. The $200 monthly loss, is that after subtracting PITI only from the rent? Or do you also include an allowance for reserves, maintenance, operating expenses (other than PITI), and vacancies?

[Diego Mamani]

Hard to say anything without more info.
1. The $50K you’d lose today, what % is that of the price you paid?
2. What % equity do you have in the house?
3. Is your mortgage for 30 yrs? Fixed rate?
4. How many years left in your mortgage?
5. The $200 monthly loss, is that after subtracting PITI only from the rent? Or do you also include an allowance for reserves, maintenance, operating expenses (other than PITI), and vacancies?

[Diego Mamani]

Hard to say anything without more info.
1. The $50K you’d lose today, what % is that of the price you paid?
2. What % equity do you have in the house?
3. Is your mortgage for 30 yrs? Fixed rate?
4. How many years left in your mortgage?
5. The $200 monthly loss, is that after subtracting PITI only from the rent? Or do you also include an allowance for reserves, maintenance, operating expenses (other than PITI), and vacancies?

[Author]

Posts