Home     Forum     401k     401k Rollovers
    Register   Login   Members   Search   FAQs     Recent Posts    




should I sell my two properties?

Reply to topic
Money Talk > Real Estate

Author Thread
c3troop
New Member


Cash: $ 1.15

Posts: 5
Joined: 26 Jun 2012

should I sell my two properties?  Reply with quote  

Hey guys I'm wondering if I should sell my two rental homes. Here is the breakdown:

Ages - 27 and 26

House 1 - Rent 1100Monthly payment with everything included is 1047. However, the home is on a 15 year note with only 13 years left 3.875%. So 330 a month goes to principal.Home is about 25 years old, will probably need a new AC soon.Owe 81k and it's worth 120kish.

House 2 - Rent 1095Monthly payment with everything included is 972. House is on a 30 year not with 26 years left 5.5%. Only about 150 a month goes to actual principal.Home is only 8 years old and in great shape.Wonderful renters, the same ones for over three years.Owe 100k and it's worth 140kish.

My wife and I just found out we're expecting and so her work hours will go down after the kid. Wondering if I should sell these homes now to put the money in the market so it is hassle free. Owning the properties stresses me out just waiting for the next thing to go wrong.Does it make more sense to dump these now while the market is doing really well where we are or should I hold them? I'm thinking House 2 makes no sense to hold due to slim profit but House 1 being on the 15 year note seems to be worth keeping.Thoughts?[/list]
Post Tue May 07, 2013 4:15 am
 View user's profile Send private message
coaster
Senior Advisor


Cash: $ 1626.30

Posts: 7990
Joined: 11 Oct 2005
Location: Wisconsin
Re: should I sell my two properties?  Reply with quote  

quote:
Originally posted by c3troop
Wondering if I should sell these homes now to put the money in the market so it is hassle free. Owning the properties stresses me out just waiting for the next thing to go wrong.Does it make more sense to dump these now while the market is doing really well where we are or should I hold them?

Of the reasons you give for wanting to do this, the highlighted reason above is the only one that makes any sense. How the stock market is doing right now does not.

~Tim~
Post Tue May 07, 2013 4:36 am
 View user's profile Send private message
littleroc02us
Moderator


Cash: $ 383.50

Posts: 1887
Joined: 09 Feb 2009

 Reply with quote  

When you say it stresses you out, does it stress you out because your cash flow is tight or because it's work you don't enjoy?

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Tue May 07, 2013 1:50 pm
 View user's profile Send private message
oldguy
Senior Member


Cash: $ 737.25

Posts: 3585
Joined: 21 May 2006
Location: arizona
 Reply with quote  

I'm a longtime landlord - from your description, I would want to keep #2 rather than #1. The new house has modern electric service, modern plumbing/toilets, new AC, water heater, roof - and probably in a better location. I like the 30 yr fixed rate loans for my rentals - the interest is higher but it is insurance against tough times, ie the cash flow is higher, you can weather a vacancy, a repair. (I never use the 15 yr notes on rentals, too much risk).

quote:
Wondering if I should sell these homes now to put the money in the market so it is hassle free. Owning the properties stresses me out


As for hassle & risk - lol, people wiht rentals are stressed by repairs/vacancies/storms so they think stocks would be easy - and people who own stocks worry about crashes, bk's, etc, and think houses would be safer because you can see them. Both are wrong - the rule 'risk and return are directly proportional" applies equally to both investments.

Traditionally, real estate and stocks have provided a very solid diversification - when stocks go down the houses make money, when houses go down the stocks make money, and best of all, most years BOTH make money.

BTW, are these houses or condos? It appears that the Tax/Insurance/Other costs are about $5000/yr on each of them - is it HOA costs, hight flood insurance costs, high tax region, etc?
Post Tue May 07, 2013 3:46 pm
 View user's profile Send private message
c3troop
New Member


Cash: $ 1.15

Posts: 5
Joined: 26 Jun 2012

 Reply with quote  

Thanks for the replies.

You listed both things that stress me out. Money is tight (have had to put in over 6,000 of repairs in the last year) and just the headache of wondering when the next thing is going to break.

Both properties are single family homes in a high tax county. Between insurance and taxes, it is right about 5,000 a year a piece.

I have the same amount of money in the market and it is so stress free to me. Sure, I have lost some at times, but I feel like it is what it is with stocks where with the houses I just never know what they will cost me.

I'm only 27 and I bought these homes about 4 years ago with anticipation of holding them as a large chunk of retirement flow, but now I just don't know...

It also doesn't help that the new renter in one of the homes is crap...maybe that's why I'm thinking this way for the first time in 4 years. I would love some more guidance from those of you that have done it for years. Am I setting myself up for disaster or success by holding these properties?
Post Tue May 07, 2013 4:42 pm
 View user's profile Send private message
oldguy
Senior Member


Cash: $ 737.25

Posts: 3585
Joined: 21 May 2006
Location: arizona
 Reply with quote  

quote:
Am I setting myself up for disaster or success by holding these properties?


I don't see any obvious disaster - each house has about $40k equity - so you can probably liquidate either whenever you want. If they happen to double in the next 12 yrs (typical) they'll be worth $520k and you'll owe only $150k (leveraged equity can grow fast). I wouldn't expect much trouble from the newer house - but which one has the 'loser' tenant?

About 10 or 15 yrs into landlording, we turned the houses over to a property manager (I was traveling quite a bit & it seemed like the breakdowns & vacancies always happened when I was out of town). That has worked great for us, been doing it for >20 yrs - the manager has a waiting list of screened tenents - so no losers and no vacancies. They take care of all of the calls, showings, repairs - and they seem to get higher rent than I can (pays for a part of their cost). At the end of the yr I get a 1099 and a report of income/expenses for taxes.

With #1 you're paying $330/m ($5000/yr) to pay down pricipal - ie, to buy equity. I like to keep that to a minimum and wait for the market to give mo equity. Besides, it cuts into your cash flow, adds to your risk. With one house, I had an IO mortgage - that house more than tripled while I owned it and most of the equity growth came from market appreciation, the monthly cash flow was high while the IO was in effect. (that allowed me to buy another house).
Post Tue May 07, 2013 5:55 pm
 View user's profile Send private message
c3troop
New Member


Cash: $ 1.15

Posts: 5
Joined: 26 Jun 2012

 Reply with quote  

I like the idea of the property manager. How does that work financially? They collect the check and send them to me or I set up an account with them to deposit money?
Post Tue May 07, 2013 6:54 pm
 View user's profile Send private message
oldguy
Senior Member


Cash: $ 737.25

Posts: 3585
Joined: 21 May 2006
Location: arizona
 Reply with quote  

quote:
They collect the check and send them to me or I set up an account with them to deposit money?


Ours is now direct deposit into our checking account - up until about a year ago, the PM mailed the check to us snail mail.
Post Tue May 07, 2013 9:01 pm
 View user's profile Send private message

Reply to topic
Forum Jump:
Jump to:  
  Display posts from previous:      





Money Talk © 2003-2016