After owning my primary residence for 5 years in northern Virginia, my wife and I are considering relocating. We are considering renting our house or selling it. However, if we were to rent it, we may lose around $300 per month. Although this is far from preferable my thoughts are two fold - 1) with amazon moving to northern Virginia, home prices are expected to go up in the next couple of years and I could hopefully sell it for a decent amount more within the next few years and 2) this could offset my profit from other rentals.
Question - given that I will most likely be losing $300 per month, is it worth holding on to this residence in hopes of getting higher resale value?
@Brandon L. - Is it necessarily a money machine if I am losing money monthly?
yes because eventually that asset will be paid off. Does your 401k give you a profit every year? pretty sure it does not. Do you get rid of the 401k because it doesnt turn a profit every year?
The property you own is always easier to obtain than the one you don't. That said, how are you calculating your cashflow?
Are you factoring in tax, insurance, principle, interest, property management(you're leaving the area, someone needs to take care of things), maintenance, utilities, vacancy, etc? Or are you saying "I pay $2000/mo and I can rent it for $1700/mo".
I would not invest for appreciation, I would invest for cashflow. This doesn't have it. Sell the house, take the money and buy yourself an apartment building or a better investment somewhere else where the numbers work. $300/mo lost is $3600/yr. That's going to add up quick! That's compounding working against you.
Could you refi the property for a better rate or just to reset the 30 year amortization schedule? Would that get you closer to a cashflow? I'm assuming you have checked rentometer? Have you also comped rents on craigslist, etc?
Here's a better idea... Have you considered renting it with a lease option? You can get a higher rent, sell for a higher future value, you could make the tenant responsible for all repairs (thus possibly eliminating management need), and collect a big chunk of change right up front. A lease option should easily be able to cashflow it.
In calculating the cashflow, I included tax, insurance, principle, interest, etc. I am comparing comps based on my knowledge of the area via craigslist, realtor.com, hotpads, etc.
Although I also strive to invest for cashflow, I think this may be an exception, since house prices are expected to increase in NOVA.
And, that is a great idea about renting with a purchase option!
Real Estate Agent · Arlington, VA · Member since 2009 · 27 posts · 1 vote
7y
@George H. Where in Northern Virginia? If you are in certain neighborhoods in Arlington or Alexandria City/Oldtown right next to Amazon you will see more of an increase than if you are somewhere in Fairfax. That can be a big difference, where is the home? Is it a condo/TH/SFH? How long do you plan on holding on to the property before selling it if you were to rent it out?
@Francisco Torres - It is actually in Fairfax. Indeed, I agree that there will much more of an increase in appreciate in Alexandria and Arlington. But, real estate agents are also telling me that real estate prices have increased in Fairfax and are expected to do so in the near future.
I own a 3 bedroom townhome in North Reston and have seen prices increased in the last year. I am considering renting it out for the next couple years or so to capitalize from the anticipated appreciation.
Do you deal with, or see many, leases with an option to buy in the area?
Real Estate Agent · Alexandria, VA · Member since 2014 · 184 posts · 78 votes
7y
@George H. - Hi George, if you aren't cash flowing, generally you would be better off selling. Consider how long you would have to wait before that property nets any return? Also, if you hold onto it long enough, you will be subject to capital gains tax. I would sell because the market is high in Northern VA and based on your cash on cash return which sounds not very favorable. Move that money into a new property or a project that will net you a stronger return makes sense.
Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
7y
You say you’ll lose -300/month but how much principle r u pay down each month? 500? Add that back in because thats money you keep just not liquid to get true amount of +200
@Brandon L. - Is it necessarily a money machine if I am losing money monthly?
yes because eventually that asset will be paid off. Does your 401k give you a profit every year? pretty sure it does not. Do you get rid of the 401k because it doesnt turn a profit every year?