Should I Sell House Or Rent it Out?

Question

Hi.  I am in a unique situation.  Around 2005, I was seriously injured and medically retired from the U.S. Department of Defense.  After I became able to walk again, I bought an RV and begin touring the country.  I visited friends on the way.  To make a long story short, I ended up buying a HUD foreclosure for a widowed friend and her 8 year old son to live in while they got their lives together.

I now have a house I have no need for.  My total cost for the house, including capital improvemrnts is $95k.  Similar houses on the street rent for $1,400 per month.

I could sell the house for around $140,000 or I could rent it out, with a property manager handling it and continue my travels.

I like the idea of holding on to the house.

Advice would be appreciated?

William Kolb · Answer

When I bought the house, it had good bones, but needed a lot of cosmetic work.  It also needed a new roof and A/C & Heater.  I fixed the cosmetic problems, got the roof resheeted and had it reshingled.  I also got a new heater and A/C.  In addition, I replaced the internal water lines.

I would prefer a steady profit stream to a lump sum.  I am on the outskirts of a big city and there are a few rentals near me.  They are never vacant.

I believe holding on to the house makes the most sense for me.

Michael Ablan · Answer

@William Kolb - Always remember capital gains, closing costs and agent selling fees.  Yes, on paper you have a 55k spread, but those 3 things will reduce your profit to half.  What's your goal for the money?  Would the steady cash flow better suit your lifestyle than a lump sum?  Will you be able to afford to pay for rehab when the house needs it?  Does it need it anything now?

I'm usually in the hold it forever mindset, but it all depends on your situation.

Alexander Martinez · Answer

I say hold on to it. If you plan to do what you stated which is to hire a property manager to over see it then stay with it. Looks like the ROI is solid. As long as you have a good relationship with your property manager and a understanding that you're out an about touring this great nation then there is no reason to sell it. Don't fear the "bad tenant' or "things can go wrong" stigma. Things like those are all part of running your business. Best of luck

William Kolb · Answer

Thank you.

Brian Ploszay · Answer

It seems like being a landlord will be a very limited experience for you:  one house.   I'd sell it because many things can go wrong for someone who isn't regularly in the business.  You may have lots of repairs, you may get a bad tenant that doesn't pay, etc...

If the property is in a promising area, or you have the management figured out, go for it...