Sell it or keep it to rent out?

Question

Hi! I have a single house with 4B 2700 sq ft. in Naperville with a property tax of $11.000. I'd like to hear your opinions if I'd better sell it in spring or keep it to rent it out in this market. The rates are going up and the market seems really slow. Have anyone had any experience renting out the size of a single house in a real family-friendly neighborhood?

Mark Ainley · Answer

@Hae Sun Yi I will admit this is not an ideal or traditional investment approach but we have been taking more of these type of scenarios this Fall then in years past due to the owners not able to seek the sale price they want.  The sales market has been softer this fall.  Our approach with these owners has been renting them with a 15-18 months lease which lands the property into Spring 2020 to either rent at a better rate based on the time of year and/or better timing to sell based on some hopeful appreciation.  Also most of these owners we have been working with are at a point where they are paying down $500-$1200 in loan balance per month which adds up over 1-3 years of renting even they are at just few hundred per month real cash flow.

We have had good traffic based in the $2500-$3500 price point in Naperville, Clarendon Hills, Downers, and a couple other higher end markets but the other questions would be:

• How rent ready is your home to be able to attract the tenants.  
• What potential capital expenses might you have over the next 3 years vs selling now?
• Taxes - Have you been contesting them?  Even in Dupage you should be contesting them.  That can help on cash flow or savings in general.
• If you sold what type of money would you have to place elsewhere and where would you put it?  If you plan to just put in the savings account that may make a difference in Account Closed questions above.  You might want to talk with Mike (above) more in depth on buying power in this market.

Account Closed · Answer

@Hae Sun Yi

In my professional opinion. I would not consider renting the property. Your taxes are killing your cash flow there in Naperville with that size of home. Also that’s a LOT of capital to be leaving into one property thats not Making you any money that could better used elsewhere

If I were you I would sell the home and use the funds to purchase one of the following options 1. A multi family property for around the same price which is very feasible in this area. 2. Several small single family homes in areas with lower taxes and lower purchase prices like Aurora, Elgin, and Joliet where your cash flow will also be much higher. 3. If you want to stay in Naperville market. Sell the home and purchase a few condos or townhomes in naperville that will provide cash flow.

If you need anymore helping breaking down all the numbers give me a call!

Hae Sun Yi · Answer

@Jennifer Hyman My husband and I haven't decided it yet clearly but right now we are more toward to something we can live in for a time but rent it out later. Our favorite place to live is West Loop but it seems to have much premium already. I need pro's advice if I need to stay in the West Loop area even though I pay premium looking for appreciation due to land value or need to consider further west side (west town) waiting for booming the area like the West Loop in the future.

Jennifer Hyman · Answer

@Hae Sun Yi contesting the taxes will not bring down the value of the house so please do start that process.

When you and the family move to the West Loop area are you looking for a house hack of some kind or looking for something that you can live in for a time, but that will eventually become part of your rental portfolio?

Hae Sun Yi · Answer

Thank you all of you who gave me a considerate advice! I really appreciate it and it does help.

@Mark Ainley 1. is there any website I can check the rental market flow like checking for house sale info with the sale price/date on any real estate websites?

2. if I contest taxes, does that eventually bring down my house value? I receive many fliers though.

3. I am looking for a property for my family to live in West Loop Chicago - that's whole another story I need to ask an advice as well. Please refer me if you know someone for West Loop Chicago area in general.

Owen Dashner · Answer

I would sell it and consider a 1031.  It's a terrible price to rent ratio, and big houses can have big problems with that much square footage.  Just painting and carpet alone can kill you with costs on turnover, and those taxes suck bigtime.  You could get a much better cashflow return if you bought other assets with it.

Richard Sherman · Answer

@Hae Sun Yi Is there anything else about the property that makes it special (family property, is it close to where you live and easy to manage, zoning for multifamily etc?)  If not, and it were me, I would sell it and buy something that has a better return.  The taxes are the killer.  11k a year?

Hae Sun Yi · Answer

potential rent is around $2700, I down 80k in that property paying mortgage $2400/month and the value is around 460-470k.

Keith Gilbert · Answer

What's your potential rent? How much would that cash flow you? What's the value of the property?