I bought a house almost 30 years ago. Lived in it for 15 years. Started renting it out about 14 years ago. Monthly mortgage pymt is $500. It has a mortgage balance of $1600, and will be paid off in February 2015. Market Rents are between $800-$1,000.
How do I determine if this was a good investment?
How do I determine if I should keep this as a rental or sell it?
Any other suggestions or recommendations?
Is the 27 & 1/2 year tax treatment all used up? If so between that and a non leveraged property I (personally) would sell and get a property that Cashflows and gets in on some of these other options.
You perform what is called a "Return on Equity" analysis, which is easy to do:
Return on Equity = Annual Net Income / Equity
So if you clear $700/month in rental income after expenses, then Annual Net Income is $8.400. I don't know what the value of houses are where you live, but if you have $100K in equity (taking into consideration selling costs to get access to your equity), the you r Return on Equity would be $8,400 / $100,000 = 8.4%. Then you have to ask yourself if you can make more on your money in another investment.
Hopes this helps. God Bless You!
@Michael Evans thanks! That is a great way to decide what to do! I appreciate your input!
*I just put in a new A/C unit this month.
*Last fall removed the old oil furnace and put in a new electric furnace.
*Has new appliances.
*Roof has at least 10 yrs left.
*Needs new windows.
*Needs new sewer line to city hook-up.
*Has 30+ yr old water tank that works fine.
*Property taxes and insurance are about $200 a mo.
*There will be no mortgage as of 2/15.
*Bought the house for $39K-$45 (can't remember back 30 yrs ago, lol).
*Tax assessed value is $130,000.
Any additional advice, input, etc?
Calculate how much net equity you have (if you sold it, how much would you net). Then calculate your annual net rental income. Take your annual net rental income and divide it by your equity to get your return on equity. If it is less than 10%, I would recommend that you sell the property and get another one that will give you an ROI of greater than 10%.
I hope that helps. God Bless You!
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