Rental Property - Sell, or Hold?
Hello all,
I am struggling with a decision regarding whether or not I should hold or sell a rental property.
Here are the details:
Seattle area (Renton)
Condo - built in 1979, the complex itself is in decent shape, but showing its age. No special assessments or indications of anything significant upcoming.
Purchased in 2011 for $46k (foreclosure)
Current value: $200k + (comparable units, in great condition - mine is NOT in great condition)
Current mortgage: $27.5k @ $75/month
HOA: $323/month
Insurance: $34/month
Property Taxes: $163/month
Total Monthly expense: $595/month
Rent: $900/month
Total income: $305/month
I own two units in the complex, and plan to hold one of them long term for both the rental income and, potentially, a place for my son to live a few years from now (If you are familiar with the real estate market in the Seattle area, you know how hard it is for young people to find a reasonably priced place to live. I'd like to save him that pain). Between the two of the rental units, it's a pretty decent monthly income. I purchased the other unit for a very similar price, but charge $1000/month, as it's in better shape than the other.
I have long term tenants in both units (5 years, and 4 years). The rent on both units is significantly below market rate. Upgraded units in the same complex are getting between $1300 and $1500/month at the high end. I could not charge this currently - the units both need a remodel.
The unit I am considering selling is not in great shape. It was low end and very dated when I rented it out to the current tenant, and has seen significant wear and tear in the 5 years they've been there. It doesn't look great. (Explains the current rent I'm charging below market rate). It would need a complete remodel before I would consider renting it out to another tenant or selling it.
I worry a bit about a market correction here in Seattle, and at 4x appreciation, I wonder if it wouldn't be best to take the money and run on one of the units.
I don't have plans at the moment to purchase another rental property here in Seattle (I think you'd be crazy to do that right now) or anywhere else, though I guess I would consider it if I could get into a small complex of some sort in a reasonably priced and growing area of the country. The only current plans for the money would be to pay off the mortgage on the rental units ($55k total, between the two) and pay off my own house. So I'd take the hit on capital gains and be pretty happy about being free of one rental responsibility and the mortgage on my house. At the same time, I feel like I could really put that money to use, and help ensure a better retirement. See my conundrum?
I did a remodel on one of them when I first bought it - did everything myself - Home Depot quality materials - and did it for about $6k. I don't have the time or energy to do this myself this time around, so figure it would cost me $20k to have someone do it for me.
I'm almost 50, and plan to retire in about 10 years. I manage both these units myself.
I would love some feedback from the community - what would you do?
- Remodel and re-rent at a higher rate?
- Remodel and sell - pay off the mortgages on both units and my personal house?
- Remodel and sell - invest in a multi-plex of some sort somewhere less expensive in the country. (I don't have an objection to buying somewhere remote and utilizing a property management company)
- Hold steady - don't do anything. Keep collecting rent?
Thanks in advance for the feedback - what a great community!