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How is my strategy to sell/rent a house?
Old 08-14-2021, 11:17 AM   #1
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How is my strategy to sell/rent a house?

Hi All,

I have been enjoying my semi-retirement but I have one vacant single family house to decide i would sell or rent again.

This house property tax was only 1800, but rent was $1525+40(pet rent for two cats)

so it has good cap rate, i wish they would stay longer but they had to relocate due to job loss here.

having met realtors. saying 140k to 170k range if i sell. but need to replace the whole roofing and repaint, some possible landscaping.

I didnt wanted to get any headache first and sell as is, but it is not so good area, i would not get much. my step up basis was 140k, so if i sell at 140k i lose all the agent fee etc. and it will short term gain for 10% if there is any gain.

so I am deciding to replace the roof and get depreciation etc and keep renting. but my concern is house market go down. that area is not so good. my sister bought it from HUD, so tax benefit is really good. and i did step up basis with this house. when she fixed up, she aimed to rent, so interior is not so fancy. but i can make good value for livable space.

so thinking fix things and selling and renting advertisement together. if i can't get any buyer for the asking price i would like to get, i would keep renting. But afraid to keep working. I want total FIRE asap. realtor suggestion is keep renting with property manager. I can consider that, but she is some lack of FIRE concept, she is all aiming to more money forever.

What do you think? and is it possible to both way together? i remember my sister did one house like that.

I have been thinking to get rid of all house soon too and concerns the house market get cool or even crash due to the death from covid.

my asset is 37x more than annual expense. but based on what and where i live. if i decide to buy expensive house or live in S. korea etc, could be different. I live a small single family house suburb STL
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Old 08-14-2021, 11:53 AM   #2
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I would sell, as it does not sound like you are really keen on being a landlord.

Costs are a lot more than simply property tax (insurance, roof, furnace, water heater, driveway, paint, carpet, etc) while not all come yearly, you can include them in the avg yearly cost.

Just last year I replaced the roof on a rental, it sucked away all the "extra" cash for the year for that unit after normal expenses, so for the year I used the rent to pay all the expenses. Made 0%.

You will also pay about $2,000/yr for the property manager, and most care less about your place than you, so will fill it with lousy tenants, and hire expensive repair folks (friends/buddies/kickback).
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Old 08-14-2021, 12:11 PM   #3
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Given where the market is in most parts of the country right now, I would throw it on the market "as is" and see if you can't sell at an acceptable price with minimal work. Sounds like you need a different real estate agent. If they can't sell your house now, then they don't know what they are doing. I'm assuming the property is not in a "dog of a part of town" since it fetches pretty decent rent.

But yes, do sell!
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Old 08-14-2021, 01:08 PM   #4
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I would sell, as it does not sound like you are really keen on being a landlord.

Costs are a lot more than simply property tax (insurance, roof, furnace, water heater, driveway, paint, carpet, etc) while not all come yearly, you can include them in the avg yearly cost.

Just last year I replaced the roof on a rental, it sucked away all the "extra" cash for the year for that unit after normal expenses, so for the year I used the rent to pay all the expenses. Made 0%.

You will also pay about $2,000/yr for the property manager, and most care less about your place than you, so will fill it with lousy tenants, and hire expensive repair folks (friends/buddies/kickback).
I may be not as keen as you think.

But I have 11 houses, and she and I bought all the houses around 2013-2018, and flipped all. So not so much big expense were not expected in short term. She could doing all kind of field to plumb, siding, roofing, electric, etc, so I didnt have much issue. many house has new furnace and water heater too. mainly sewer back up, which needs to do every 2-3 year. I have my handyman with former licensed hvac guy too, and he charge very cheap. I know how to do small projects, so it was all running smoothly.

I know all the expense, I mentioned the property tax only since I have many houses, beside on the comparison of tax. for example, I get 1275/month. but tax is 2300. so comparing on this, the house is paying much less tax.

The reason of low tax, because she bought it at 45k in 2018, and flipped up. she used to flip all at begining, but this house is the last one she did, she realized no need to do that way since she have skills. then she can repair to use depreciation for tax reason when she want.

flooring got some scratch but still good shape etc. i see rental market pointing. but selling is not so good, ppl may not want to buy that condition.

I am afraid house market crash, but if concerned of inflation, keep houses is good, right?

But mainly, everybody told me to sell all houses when i had the probate. but I thought it was still good deal since recent flipped, I kept most of it. with house bubble, it got all 20% increased in value.
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Old 08-14-2021, 01:29 PM   #5
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OP you seem to do a lot of waffling between selling and keeping...


You've posted about this subject before. If you are stressed out by landlording sell...but you seem to be stuck and causing yourself some stress.
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Old 08-14-2021, 03:30 PM   #6
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OP you seem to do a lot of waffling between selling and keeping...


You've posted about this subject before. If you are stressed out by landlording sell...but you seem to be stuck and causing yourself some stress.

Very correct. I didnt do anything for this year for resting. But due to tenant's side and market which I can't control, I am on the ball all the time. Sad.

I would like to sell all in my mind, and I think I will be alright in financially, but need to be brave to make the decision. I must be too greedy to let go.

however, my landlording isnt bad as sounded. And I am getting better on that. that's the another reason to make me confused. I got all skilled finally now, and I wanna get all rid of them.

And I am charging lower than market, and provided all good repair quickly when requested, my tenants are satisfied with me too.
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Old 08-14-2021, 03:32 PM   #7
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Originally Posted by retire to nature View Post
Very correct. I didnt do anything for this year for resting. But due to tenant's side and market which I can't control, I am on the ball all the time. Sad.

I would like to sell all in my mind, and I think I will be alright in financially, but need to be brave to make the decision. I must be too greedy to let go.



You're not greedy, I think you are just second guessing yourself and worried about making the "wrong" move.


Sometimes it's harder to make these decisions by yourself.
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Old 08-14-2021, 03:44 PM   #8
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I have bought Ethereum before. Bought in very low price, so I could make $100k earning if I sold in bubble time in 2018.

It was 24hr ongoing and up and down was so bad, get stressful, so I sold at the original price. by my remembering I only had $200 earning hahaha.

I guess, from my experience, the decision is harder for me. if I lose the chance to sell all this time, I may have to stay long time.

But I dont have debt. so whatever, I collect is just income.

my airbnb house is making 5k/m but tax is less than 2.5k. how can I let it go?

also, most of my property now got step up basis. all depreciation starting again, then i can decrease my income too.

Or I just buy stock with sold money would be better to keep income low?
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Old 08-16-2021, 03:08 PM   #9
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What you need to ask yourself is do you want to be a landlord with all its risks, costs and responsibilities?

If not, sell. And that whole worry and hassle goes away.

I’ve enjoyed being a landlord for over 30 years (well mostly). Eventually I had 35 houses. No matter how well they were maintained there was always something happening you aren’t prepared for.

Eventually it just grew tiresome. I was also spoiled by having many quality, long term tenants and I just didn’t want to take the risks of having to deal with new unknown ones. I wanted to spend months away and didn’t feel comfortable doing that with unknown people.

So in 2018 or so I began selling when houses became vacant or to the tenants who were interested in buying them. Some of the earlier ones I sold have skyrocketed even higher in price since then due to the large increases in values this past 18 months or so. But I don’t regret selling.

Like stocks, you can’t really time the market.

Just ponder your lifestyle and comfort level and make sure you understand the risks v the rewards of owning a rent property. Then decide if remaining a landlord is something you really want to do.
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Old 08-16-2021, 05:50 PM   #10
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OP, from this an other posts that you've made, it doesn't sound like landlording is something that you really want to do.... rather you do it reluctantly cause you think you should or need to.

I would sell. If your selling costs were 8%, you would only need to sell it for $152k to get the $140k that you have in mind. Like others have said, the real estate market is pretty hot right now so if you don't want to own it long-term then this is the time to sell.

I would sell it "as-is" knowing that you may need to make some concessions as part of negotiations for the state of the roof, paint, etc.
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Old 08-16-2021, 06:34 PM   #11
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@retire to nature

Sell the house. Your assets at 37x expenses are sufficient to retire.

Retire.
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Old 08-17-2021, 12:06 AM   #12
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If I were on the "edge" (sell/don't sell and rent/don't rent) I'd let this be my guide: During Covid, it was difficult to impossible to evict for non-payment of rent. Based on that, the decision should be easy (for me, anyway) SELL! But YMMV as in everything else.
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Old 09-16-2021, 11:33 PM   #13
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Hi I am back. Have been busy with repair on the house.

Now I am almost finishing up and be ready to sell and I realized I totally misunderstood about the short term capital gain tax.

I am aiming to gain about 30k to 40k for this house. but it will be to short term since the title was changed 1/8/21.

I interpreted
2021 Short Term Capital Gains Tax Brackets
10%- $9,950
12%- $40,525
22%- $86,375
24%- $164,925
32%- $209,425

So I was thinking I can pay 12% instead of 15% for long term capital gain. so I was leaning to selling instead of renting.

But now I realized it would be fit to my income tax rate, which possible to 24 to 32%.

For 2020 tax, my tax rate was jump from 22% to 32% due to adding inherited rental business income + capital gain income.

I was accepting all the advice here to sell it, but now I came back to starting point now. The house value was so lower than I want to sell. but renting value would be very good and tax would be very low.

I did the whole roofing, so depreciation could be good too.

What should I do? My preference is still selling but I dont want to pay all to tax either. should I kill a few month to meet to long term?
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Old 09-17-2021, 12:00 AM   #14
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Hi I am back. Have been busy with repair on the house.

Now I am almost finishing up and be ready to sell and I realized I totally misunderstood about the short term capital gain tax.

I am aiming to gain about 30k to 40k for this house. but it will be to short term since the title was changed 1/8/21.


What should I do? My preference is still selling but I dont want to pay all to tax either. should I kill a few month to meet to long term?

If you prefer to sell, what about stipulating in any sales agreement that the sale will not close until 1/9/2022, then your gain becomes "longterm" for income tax purposes.

We are already into last half of September. By time you get house totally ready to sell, get it listed, get offers, you could be looking at late October at earliest. In this RE market, I doubt any stipulation to delay closing to 1/9/2022 would be any obstacle at all. In fact, unless you get an all cash buyer, buyer's lender could easily eat up another month or two.

So, just stipulate closing no earlier than 1/09/2022, and since you prefer to sell--sell it, for a "longterm" gain!
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Old 09-17-2021, 06:27 AM   #15
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If you prefer to sell, what about stipulating in any sales agreement that the sale will not close until 1/9/2022, then your gain becomes "longterm" for income tax purposes.

We are already into last half of September. By time you get house totally ready to sell, get it listed, get offers, you could be looking at late October at earliest. In this RE market, I doubt any stipulation to delay closing to 1/9/2022 would be any obstacle at all. In fact, unless you get an all cash buyer, buyer's lender could easily eat up another month or two.

So, just stipulate closing no earlier than 1/09/2022, and since you prefer to sell--sell it, for a "longterm" gain!
Exactly what I did on one this year. Under contract several months before closing because I needed to sell after the one year mark or pay twice as much in taxes. Mine was land though.

In this case you could simply rent the house to the new owners and close after your one year date. There is a risk it wonít close but thatís always a risk. Thatís what I would do or just leave it empty until then.
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Old 09-17-2021, 11:21 AM   #16
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So, just stipulate closing no earlier than 1/09/2022, and since you prefer to sell--sell it, for a "longterm" gain!
Thanks for the reply. I have thought about this too.

While I am repairing for a month, I have learned about the house better. it is nice floor plan and good livable size. but interior is not so greatly done and the tenant had two cats. now basement is smelly bad. And I dont wanna go with too low price either. So it can be a bit hard to sell. And redfin and zillow says 5% lowering in a month. it is getting cool too.

so if this house is standard and good, it doesnt sound bad to just put stipulate, but I am a bit concerned to sell. Now I can get upto 1800 or 1900/m rent rate with this house since ok enough updated for renting if i accept with pet, it could be easily rented out.

The basement has walkout so it is additional livable area with laminated flooring. There is big windows for view but it cant be open. an agent said it maybe good idea to take off all the flooring due to the smell. I know all agent talking things to make selling easily for their own benefit. I dont have any willingness to do that. since it is only 2 and half year old. Then should i get rent one more cycle and take off after they move out? And this house is the highest profit rate except airbnb house. so should I run one more around and sell at the last... still want to get rid of any headache.
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Old 09-17-2021, 11:24 AM   #17
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In this case you could simply rent the house to the new owners and close after your one year date. There is a risk it won’t close but that’s always a risk. That’s what I would do or just leave it empty until then.
Thank you for the reply, I didnt think about possible rent until the selling date.

I was wondering if I should go rent to own option for this house too. Since it has bad smell and good enough interior, and high profit rate etc.

ppl want rent to own alot too. then it wont be so hard to find tenants either.

And I dont want to sell too low either. FHA appraisal could be a problem, so there is some risky on your idea.
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Old 09-17-2021, 11:34 AM   #18
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Don't diss the agent for telling you not to try and sell a house that stinks like cat pee.

Do the right thing because it's really a lower level not a basement
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Old 09-17-2021, 11:37 AM   #19
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I can't imagine too many folks wanting to buy or rent if there is a cat pee smell in the basement, unless a buyer would cut the price offer.
I would first do something about that.
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Old 09-17-2021, 11:44 AM   #20
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+1 If you don't remediate the cat smell then bidders will.

If you do end up with a sale and want to lease it until Jan 2022 to get long-term capital gains tax treatment then you can just ask for as big a deposit as the buyer is willing to provide to incentivize them to close.

Or if they are a cash buyer then perhaps a 100% deposit held in escrow and free rent until January 2022.
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