We are just starting out in real estate investing, so I would appreciate input on our situation.
We have used our former home as a rental for the last three years. We've been using a property management company who rents it far below market and whom we're unhappy with for other reasons.
We can either sell this spring/summer when the lease runs out, or keep it as a rental and manage it ourselves.
We bought it in 2006 (sigh) for $130K. We owe $110K and could probably sell it for at least $155K if the DFW market stays strong.
Selling = $35,000 after making repairs and realtor fees
Rental = $1400-$1,500/mo (I am pretty confident that this is a conservative amount after months of stalking craigslist and MLS) with entire payment of mortgage, taxes, insurance of $1080
Cons: The house has had recurrent foundation troubles (we paid $17,000 to fix it with a lifetime transferrable warranty, though), trashy next-door neighbors (they are really bad), and is not in a good school district. Pros: It's in a great central location with easy access to all the best parts of Dallas, part of a nice neighborhood overall, and is a lovely, solid house.
If we sold it, we would save some of the money, use some of it to improve our own home, and use some of it to reinvest in real estate. (Probably $20,000 toward 20% down on another investment property.)
The property management company we're using has never had a lease renewed in the three years they've had it. I'm not sure if that's because of their crappy management, or because of the problems I mentioned above. I have overall been pretty unhappy with the quality of the tenants.
The house itself soooort of fits into our business plan -- it's a 3/2/2 in a nice middle-class neighborhood -- but I'd really like to focus in the future on houses zoned for better school districts.
It seems to me you are probably cash flowing negatively on the house once you factor in consistent turnover of tenants and the costs involved in that. That hints strongly to me that you should sell it.
Also selling means you only have to convince one person to live next to the trashy neighbors and not a new tenant(s) every year or two.
Dave Ramsey asks the question this way, would you buy the house again?
"We've been using a property management company who rents it far below market and whom we're unhappy with for other reasons." Why?
Rental Business (Landlording) may not be for you...
PS With all due respect, everything we know and do is a learned skill. Remember, when we're born we don't even know how to eat or cry. We're spanked, just to get us to cry;-)
Is it a problem to rent with the bad neighbors? Are there frequent problems because of them? If so, I'd probably sell the property. If you decide you can live with the neighbors and rerent you definately to hire a new property management company...or manage it yourself. To find a good prop mgt compamy go to local realtor investment meetups and as for referrals. Hope this helps...
I would probably sell it given its a sellers market in Dallas right now (in most locations) and you might not get the chance to sell at a price that will net you a profit later. Take the net profits and learn from this experience to do better the next time. Good luck!
Knowing what you know now, would you buy it today? If you would, then you should keep it. If you wouldn't then get rid of it.
I would sell it, and use the money for a down payment on the right property.
The neighbors are just inconsiderate. They have barking dogs, keep junk in their yard, let their kids roam wild to the point that none of the other parents would let them come play anymore. We literally had code enforcement on speed dial and they were one of the reasons we moved (school district was the main one, though).
If I knew then what I know now, I never would have bought the house. Too much anxiety, money, and heartache between the foundation issues, the school district switcharoo, and the neighbors.
I guess that's my answer. Thanks for putting it in perspective, everyone.
Yes - you got it. If you are not going to buy it knowing what you know now...then by all means just sell the house and move on. Use the money to buy a better deal in a better area.
I don't appreciate you trash talking me...I've tried to be neighborly!
Richardson is a great town to be selling in. Right now in all of Richardson, there are only 18 active houses in the 135k to 175k range!
[email protected] | 214‑912‑5638
In your selling calculation don't forget that you may owe a bit of capital gains taxes (not a lot) since you are past the two year window for selling a primary residence. I don't think it's anywhere near enough money to sway your decision, and I'm in agreement with the "sell" vote. I admit I don't know all the rules on this.... I think you MAY be right on the edge because it's something like "must have lived in the home for 2 of the last five years" to avoid the tax. Anybody with better info want to chime in with the specifics as they would apply to this situation?
Jean Bolger, 33 Zen Lane | http://www.solidrealestateadvice.com
If you're planning on reinvesting it, you might want to consider doing a like kind exchange. There are some extra costs involved but it would at least allow you to defer the gain. Might be worth doing the math to see if it makes sense.
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