Rent or Sell (College Station, TX)

14 Replies

23 months ago I purchased a 2007 vintage 3/2 1156' single family home in a growing development for $89K to live in while working at TAMU. This house is on the small end of the range for this neighborhood. I have since done a complete rehab with new kitchen and bathroom, high end carpet in the bed rooms, porcelain tile in all other house space, deck install and all new appliances. I now intend to retire and move back to Florida in June...... I financed $70K at 3.50% so I now have about $32-35K of my cash tied up in the house. A house in the development, same age and floor plan, also recently renovated just sold for $130K so I think that if I sold the house, I would probably walk away with between $45-50K...... My total monthly house expense now (mortgage/taxes/insurance and HOA) is $600 per month. I think I can reasonably expect to receive $1200 per month in rent based on the average for this area. If I rented, I would definitely hire a management company. I really like the idea of netting $300-$400 a month passive income and some one else paying my mortgage especially at such a low rate. I am also thinking that I would never be able to make the same amount from the equity if I sold. I think I need to make a decision soon. I appreciate any advice on this matter. Thanks!

I, personally, would be more inclined to go the rental route.  It offers you a good cash flow and will only get better as the mortgage is paid down.  I love the idea of passive income, plus as your equity grows you cold, eventually, use it towards purchasing other investment properties.

Hi Tom,

I recently purchased a single family home in College Station. I am an out of state investor and have not regretted the decision yet. I am very new at investing but I have had a great experience so far. Personally, I feel safer with newer properties but if the numbers all work out, it could cashflow now and you could draw from it in the future. 

 I have what is so far a very decent management company who is pretty good with making me feel like my investment is under good supervision.  I would be happy to recommend them and give you contacts if you would like.  

Thank you for both your comments.  I am inclined to rent but the 50-2% rule that I keep reading and hearing about makes me nervous. I do not care to manage the property long distance so I will need a decent property manager. @Justin Bilancia I would appreciate the contacts.

@Tom Giles  When making a decision like this it is always helpful to think in terms of buying the house from yourself.  Otherwise, you are letting inertia help make the decision for you.

If you sold the house, you would have $45K in your pocket.  Let's work backwards.  Would you buy that house with $45K down with the exact mortgage you have now?

As an investor, I would not because I could make that money work harder for me.  If you are not an investor, that is, if you are someone who might end up owning a rental or two as a convenient investment, it might work for you.

@Tom Giles  I'm still a newbie, but have been really listening intently to the podcasts and reading the forums and blogs.  The thing to remember is that the 50% and 2% rule are technically guidelines only and not a staunch rule.  For instance, here in Houston I don't believe that it is possible to get 2% of the purchase price for rent.  The guest on podcast 101, Dawn Brenengen, stated that her market could only get .8-1% on average, but she was still able to cash flow.

If you run the numbers and take all factors into consideration (repairs, PITI, HOA, management, etc.) and still come out with positive cash flow you should be fine.

@Larry T My logic using the 50% rule is: $1200 per month rent - 50% = $600 per month gross income - $200 interest portion of mortgage payment leaves me $300 net income and $100 principle. I am thinking on an annual basis, this is a 10% return on my $45K equity. Is my logic correct? 

Originally posted by @Tom Giles :

@Larry T My logic using the 50% rule is: $1200 per month rent - 50% = $600 per month gross income - $200 interest portion of mortgage payment leaves me $300 net income and $100 principle. I am thinking on an annual basis, this is a 10% return on my $45K equity. Is my logic correct? 

The rule is just a quick calculation to determine if the house might be a deal and worth further investigation. You need to know the actual numbers.

Assuming your numbers are correct, yes you are correct.  You may stand to benefit from appreciation too.  10% compares to an average return of 7% with the stock market--much better, but less liquid.  Not bad for a convenient investment.  

The company name is BCR. The manager I work with is Mary Derkoeski. She and her team are very responsive and helpful. If ever I'm in College Station I would be happy to check on things for you. Good luck if you decide to hold on to it. 

[email protected]

tel:979.694.2747

@Tom Giles ,

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@Justin Bilancia thank you Justin. BCR manages our neighborhood HOA, I'll contact Mary soon.

@Tom Giles  I use the 40-50% rule to figure if it is a good deal.  From your figures looks like your actually in the property for 89k purchase and 30ish in rehab ===129k  I would assume you would list the property with an agent to sell it if that was the route you went? So you would potentially be losing money not figuring in the interest paid closing cost taxes etc (unless taxes are escrowed in your payments) If I understand your post correctly.  I would say rent the property unless you needed the cash.  Hold on to it for 5-10 years and get into the green on the deal would be my suggestion. From an investors stand point your 3.5% interest rate is "free money". Let someone else finish paying your mortgage and capitalize on some monthly cash flow.   Good luck !

Depends what your goals are long term! Personally i love rentals and am a buy an hold investor. It sounds like your house would be great in self-management. Before you write off self managing. I would think about it! We have done amazing self managing our homes. We are buy no means local as much husband is active duty navy so home is relative. 

Here is a great article I wrote on the buy and hold question. 

http://www.biggerpockets.com/renewsblog/2014/12/29...

@Joshua Houchins  I purchased for $89 and have roughly $15K in the renovation so if I were to sell, I would net about $10-15K after commission and other sellers costs.  It is in pristine, better than new condition with many upgrades so it would probably sell quick If I were to go that route. In march, I will have lived in the house for 2 years.

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