Profile picture for pwrsil

Sell or Rent

Hello,
Wondering about selling or renting my present house. Will be moving to another house in the area. Will have to put an extra $350 out of pocket to cover the mortgage after an estimated rent, which is doable, but with the new house, it will consume 90-95% of take home pay. Have not been a landlord before. If I sell, I will be netting a decent profit since it is a seller's market now. The house is 13 years old and is in a desirable neighborhood in Redmond.
What are the pros and cons of renting vs selling in this area and in this market?
  • March 25 2014 - Redmond
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Answers (10)

Profile picture for KarishmaKiri
I think it depends on your financial goals and opportunity cost of putting that money towards other investments. If you are cash flow negative, then you may want to think about what you aren't able to invest in as a result and the rate of return you could expect in that other investment and view that as your opportunity cost. In addition, if your place is in a high appreciation area, it may not matter if you want to hold it for a few years and reap even further gains. For capital gains tax, if you lived in the home for 2 out of 5 years you are exempt from capital gains (you should confirm with a CPA since everyone's tax situation is different). If you can get great appreciation, have some principle reduction by tenants paying down your loan, and don't have any other investments that are more worthy, you may want to hold for a bit longer and perhaps sell before the capital gains tax clock. 
  • May 29 2014
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Profile picture for Eric Locke
Sell the thing & take your profit or put your profit towards your down payment.  Sure you'll have to pay $350 a month for someone else to live in your rental to pay down your principal, but how much will you have to pay once they leave?  You'll have double mortgage during the time they are gone & also several thousand in repairs to make rent ready again for another tenant.

I'd sell the thing, less risk, its in good shape now, its a sellers market again, & you can roll over your profit into your new home tax free.

I own 14 rentals & manage 34, I've seen great renters & I've seen 10x that amount in terrible renters that leave the house looking like a disaster.

Eric Locke
Realtor
Landlord 12+ yrs.
KS
  • March 25 2014
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Profile picture for daveskow
In my opinion "take the profit and bail now"
  • March 25 2014
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The extra $350.00 per month that you said you would need to pay for the next 12 years is $50,400. You will also have maintenance costs associated with being a landlord over the next 12 years and chances are that a renter is not going to take care of your home the same way that you would so that could be an issue if your decide to rent your home out. If you would like a free CMA (Comparative Market Analysis) to give you an idea of what your home could sell for right now just let me know. I will also provide the amounts of Title, Escrow, and Excise Tax to you along with any other fees you might have. As far as real estate commission that you would pay, If I were to list your home I would ask you what you think is fair and we would go from there.
  • March 25 2014
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Profile picture for pwrsil
still in a dilemma. potentially could own this place in 10-12 years time as an income producing asset. Is it worth going through the out of pocket expense for the next 12 years and the hassles of being a landlord?
 Or is it better to take the profit and bail now?
  • March 25 2014
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The costs with selling depend on the price of the home mostly. Excise tax is 1.78% and title and escrow depends on the price of the home. Then you have the real estate agents commission. I could email you a list of all of these amounts if you give me a listing price.

  • March 25 2014
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Profile picture for daveskow

excise tax in  king county 1.78% ( I believe )

your share of the  escrow fee and  title  insurance  will vary based on your  sales price ..... assuming  a price  in the  400-500K range .....these should total  approx $2K


other  expenses -  agent commissions / pro-rated  taxes  and utilities /

  • March 25 2014
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Profile picture for pwrsil
Alain thanks for the response. What are the typical costs associated with selling? i mean how much is the excise tax and closing+title fees?
  • March 25 2014
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Profile picture for daveskow
sell  for  all the reasons  you outline :)
* avoid being a landlord * avoid a negative rent  every month * sell in a good market
  • March 25 2014
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I would consider selling if you are in a position to do so. Right now is a sellers market and interest rates are still low which helps induce buyers to buy. These conditions won't be like this forever. If you have any other questions or need anything else feel free to give me a call or email me.
  • March 25 2014
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