Need Advice: Sell Rental Property?

[FI by 2024]

Hi, looking for thoughts on what I should do about my rental property. I bought it three years ago as a rental. I had solid, responsible tenants for those three years, but they moved out in July. The house has now been empty for 3 months. I've shown it multiple times and received dozens of calls and emails, but nobody has submitted an application.

Since I'm having so much trouble renting the place out, I'm considering selling. This wasn't the long term plan (I was thinking I'd have 3-5 houses by retirement to have supplemental income), but the house has appreciated considerably in the past three years. Comps are $100-120K over what I paid.

According to my research, I am at the bottom end of a reasonable rent for this size house in this neighborhood. Similar sized houses within 2 sq miles are renting for $1550-$1700 per month. I am priced at $1550 per month. I've had three property managers submit their suggested rents to me, and it matches what I'm asking ($1500-$1650). I've asked for feedback from people I've shown the house to and am not hearing anything I can fix (last interested parties' house didn't sell as planned, so they fell through).

Selling would be less of a long term hassle, but doesn't match my original plan. I can lower the price as low as $1400 and still cover expenses, but everything I've read says going below market value is a bad idea. Well priced houses in the neighborhood are selling in about 3 months.

My questions are:
- Should I keep trying to rent out the house, or sell?
- Is there any way to minimize the amount of tax I will pay?

Notes on my tax situation:
- I am 95% sure I won't buy another house within 180 days, so a 1031 exchange is unlikely
- I am active duty military and will be deploying early next year, so my taxes will be low for 2014
- I've never lived in the house so I can't claim use and therefore be exempt from capital gains taxes

TIA for your advice!


Sent from my iPhone using Early Retirement Forum

 

[Ginny]

There is something to be said for semper gumby or being flexible. We are simplifying by selling our rental properties. Long term good tenants are hard to find. I say sell.

 

[wolf]

Do not understand. If the rent you are asking is on the lower end. Your
house should be rented out.

1. Time of year could be a factor. Nov. Dec. Jan. No one moves. for obvious reasons.

2. Is it possible, you are asking for too much rent? Are the Realtors giving you false rental numbers, so you will be discouraged and give them a
LISTING.

 

[Senator]

There are only two reasons you cannot fined a renter. You are either overpriced, or under marketing.

Start looking in the mirror to find the reasons why you cannot rent it out. I have a few tips on my own blog, feel free to get some tips and see what I do.

I only rent to quality renters, and I rarely have any downtime between tenants. I typically get 24 of 24 rents collected by the 3rd of the month.

 

[ChiliPepr]

Every month you do not rent it cost you a month rent... dropping the rent $100 only costs you $1,200 a year.... my view would be to drop the rent to $1,400 and be very, very picky on the tenants...

 

[ivinsfan]

Something doesn't add up here. If you aren't overpriced on rent, there must a good supply of rentals available, since you have had all the lookers. They are finding something else they like better or they can't afford your rent.
I'd probably just sell it if the numbers you gave are correct, even after commissions and taxes you will have a nice check.Why don't you list it a good price for you while it's sitting empty, if you get a buyer unload it. School has started which might mean families aren't really wanting to relocate. You house was available before the school year started and no one rented. Is there a problem with the school district? Of course that might figure into your sale price as well.

Three years should qualify as a long term capital gain, , do you own due diligence on that

 

[ArkTinkerer]

Advertise in papers and online. Seems counter-intuitive but sometimes minor cleaning and raising the rent will get you more applicants. Being at the low end can get people who are stretching their budgets to try and go where they can't really afford. I also think there is a sort of tiered market for housing. You don't want to be on the bottom tier for your area.

 

[38Chevy454]

Being in military, what are you going to do when you leave town? You will need a prop mgmt company then, very hard to do self-managed being out of the area. If you want to keep it, then just get a prop mgmt company to start now and let them find new tenants. $1550 rent less 10% prop mgmt fee is approx $1400 in your pocket, where you say the numbers still work out for you.

I would just sell, pay the LTCG taxes and simplify your finances and lower your potential stress. Problem is this time of year is less desirable for selling, so that tends to lower sale price a little. However, people are constantly buying and selling, so it does not mean you can't make a deal. If the house is clean, and good price, you can get someone to move in before the main holidays on a quick sale.

I am glad to be out of rental business. Yes it was good financially, but glad to not have to deal with tenant BS. I am happy to have it invested in regular brokerage account with no hassles and less worries.

 

[Amethyst]

I assume you've checked with your unit's/command's housing section, or whatever your branch of service calls the department that screens rental housing for military members? My active duty co-workers who are landlords, seem to have luck getting other military members as tenants.

Personally: We were so sick of the landlord business that we sold our property at a loss to be shut of it. On our real estate broker's advice, we priced it 5% under market and it sold the first day, with no nonsense about wanting "closing help." We regret the losses, but our CPA says they'll be useful at tax time.

Amethyst

 

[FI by 2024]

I'll try to answer everything - it's hard to keep it all straight when answering on my phone.

- I really do think the rent is right. The house across the street is the same model with a pool, and it is renting for $200 more each month than I am asking. I know it can seem like someone is being unrealistic when they say the price is right but it isn't renting, but I've done extensive, ongoing research.

- The school district is middle of the road for my city, so it's not a bonus but shouldn't be a huge detractor.

- I have a property manager lined up for when I deploy. I'm just trying to do it on my own when I can so I can get experience.

- I have advertised on the military housing website, but haven't talked to the housing office. I'll try that, thanks! Renting to people in my unit won't work - we are very small and the next person isn't due to arrive until March.

- I'll probably go with the "put it on the market and see what happens" plan. I'd love to keep it as a rental, but only with the right tenants.


Sent from my iPhone using Early Retirement Forum

 

[pb4uski]

I would sell. It will simplify your life and be one less thing to worry about while you are deployed. Thank you for your service.

 

[SJ1_]

Hi, looking for thoughts on what I should do about my rental property. I bought it three years ago as a rental. I had solid, responsible tenants for those three years, but they moved out in July. The house has now been empty for 3 months. I've shown it multiple times and received dozens of calls and emails, but nobody has submitted an application.

Since I'm having so much trouble renting the place out, I'm considering selling. This wasn't the long term plan (I was thinking I'd have 3-5 houses by retirement to have supplemental income), but the house has appreciated considerably in the past three years. Comps are $100-120K over what I paid.

According to my research, I am at the bottom end of a reasonable rent for this size house in this neighborhood. Similar sized houses within 2 sq miles are renting for $1550-$1700 per month. I am priced at $1550 per month. I've had three property managers submit their suggested rents to me, and it matches what I'm asking ($1500-$1650). I've asked for feedback from people I've shown the house to and am not hearing anything I can fix (last interested parties' house didn't sell as planned, so they fell through).

Selling would be less of a long term hassle, but doesn't match my original plan. I can lower the price as low as $1400 and still cover expenses, but everything I've read says going below market value is a bad idea. Well priced houses in the neighborhood are selling in about 3 months.

My questions are:
- Should I keep trying to rent out the house, or sell?
- Is there any way to minimize the amount of tax I will pay?

Notes on my tax situation:
- I am 95% sure I won't buy another house within 180 days, so a 1031 exchange is unlikely
- I am active duty military and will be deploying early next year, so my taxes will be low for 2014
- I've never lived in the house so I can't claim use and therefore be exempt from capital gains taxes

TIA for your advice!


Sent from my iPhone using Early Retirement Forum

I found that people never give honest feedback for some reason.
we had a house that wasn't selling with a lot of lookers and they all gave
diff. reasons.
When I was cutting the grass a neighbor asked if I was the owner
and I told him no I was the maint. man. He then told me why the the house
was not selling.....
For rent prices I always look online and drive around and look at comps.
If your rent prices are within line I would have some RE agents look at
your house and see what they think is the matter with it.
You need to find our what the prob. is because if u cannot rent it u prob. cannot sell it. JMHO

 

[Gatordoc50]

What I have done to increase interest is to offer the house for rent with pool and lawn maintenance included. The following year, instead of increase in rent, I turn one or both over to the tenant.

 

[RetireBy90]

I would suggest you look into getting a manager now so you have a little time where you can watch how he or she operates. You can learn from that, and get an idea of how you work with him. You need someone who feeds you the right volume of info so you will be comfortable while away. If you can hang on, and not have to put a lot of more $$ into it you will have some income and then have a house to either sell or continue to rent once you retire.

Rental homes take some time or some $$, but so does any business you own. Look at it like a small business you own. Of course you can tell from my remarks I am an advocate of rental,property. I sold two rentals over 20 years ago and wish I had them now.