Selling vs Renting

4 Replies

Single family home downtown Los Angeles 

FHA Loan 30 yr

Original loan amount - $137,514

Original loan date - 8/11/2013

Current balance - $131,082

Interest rate - 4.250%

Monthly - $1,288

Property description:

4 bed / 2 bath 

1,400 sqft

Backyard 

Garage - currently no car access

4 car drive way (inline)

Porch

Small yard

Close to hwy, markets, schools, hospital, 1 mi east from USC.

I have read conflicting opinions on buying vs selling.  Using a calculator on one site it recommended selling and putting my money in a high yield savings because it would make more money vs renting.  However, those conditions I weighed we're assuming rent was under $2,000 monthly.  Then I read it's better to rent based on the 2% rule.  Just so many articles.  Your thoughts please...

If you are able to rent at 2% of property value and your expense ratio is 50% then you are looking at 12%.  If you add 3% for appreciation then you have 15% per year.  Obviously, that beats any high yield savings.  Using leverage will give you even higher rates.

These two investments are not comparable in terms of risk.  Also, there are non financial considerations including how much you want to be involved in the process.

Don't let anyone decide what is best for you.

The best to you.

Bill 

Everyone on this website has their own thought and opinions on what a steal is in regards to a "deal". Personally I am an advocate of judging it based on your long term goal. While we have bought fantastic purchases that we could flip it is not worth it for the small profit compared to the long term growth and cash flow. 

On the other hand, I love landlording. I like self-managing and have even turned it into a huge part of my business model. We buy pure rentals when we are transferred and rent them out. We are into building cash flow in appreciating areas so our cash flow is preserved and succeed for our goal in 15 years!

So the question for you, is what are your goals? What is the house worth, what can it rent for? Do you want a profit now or a cash flow long term? Are you willing to be a landlord?

It technically sold for $245,000 but through a government program I bought it for $137,000

Zillow (Zestimate) has the house pegged at being worth about $305,000 now.  Rent $2100.  I am leaning toward renting it out in a few years.

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