Sorry for two posts in 24 hours, but we MIGHT be purchasing an amazing fixer upper dream home and I'm just trying to analyze all variables about the best choice for our current townhome. If our purchase comes together it will probably happen fast and I want to be very informed so we can make the best decisions and not be deer in headlights.

I'm making a list of factors I should consider for the decision and here's what I've come up with so far:

-estimated current sale price
-estimated monthly rent
-estimated monthly cost (taxes, maintenance, insurance, potentially property management)
-tax considerations
-legal & liability considerations
-time and aggravation of managing a rental (even if hire PM)
-vacancy rate
-current interest rates and opportunity cost of equity in home
-rental market (how balanced is supply/demand for type of unit) and future outlook of market
-expected appreciation
-diversification of assets if personal residence is only real property held
-knowledge gained of being landlord for future opportunities

For selling and possibly renting I would get a realtor involved, but I don't want to get involved with one until I know moving is a reality.

Our type of rental is an underserved, and always in demand type of rental so prolonged vacancies should not be an issue, but that doesn't mean the rental price justifies having that cash in that asset. There are almost zero worries about the neighborhood declining either. Since we've lived here we've updated all the big ticket things (and probably overspent on nicer than merited) like HVAC, all appliances, rerouted some gas lines and added tankless, so I doubt we'd be hit with a ton of big ticket items at once if we kept it.

There are very, very few direct comps, but our neighbor (really good comp) just listed his house for about 55% higher than I would have reasonably expected. They're having an open house today and I'm planning on chatting with his realtor and saying if they get anywhere near that or have other buyers looking for something similar in that price to call me.

What considerations am I missing? How did you make your same decision, and did you regret it?

The only thing to consider when making this decision is exiting tax free now vs exiting paying LTCG later.

Because you only make money on the exit. Most of the cashflow will service the property/ vacancies.

With the proposed changes of the tax code this is a no brainer.

Unless you're think it's going to appreciate 3x in the next three years, don't do it.

Interesting perspective speculating about future tax codes vs today. Something to think about for sure. I was actually thinking about very slowly learning and acquiring properties in the future. I'm absolutely love researching and casting a wide net and being creative about finding properties not on MLS. Potential looming tax changes could certainly change the equation on many investment properties, even if bought at a steal though.

As far as 'cash flow', the property is paid for so rent would definitely generate a positive cash flow even accounting for all expenses, vacancies, maintenance taxes, insurance, etc. That doesn't account for the opportunity cost of doing something else with that money though.

Thanks for bringing up a great point to consider.

jamotoe1 said:

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Interesting perspective speculating about future tax codes vs today. Something to think about for sure. I was actually thinking about very slowly learning and acquiring properties in the future. I'm absolutely love researching and casting a wide net and being creative about finding properties not on MLS. Potential looming tax changes could certainly change the equation on many investment properties, even if bought at a steal though.

As far as 'cash flow', the property is paid for so rent would definitely generate a positive cash flow even accounting for all expenses, vacancies, maintenance taxes, insurance, etc. That doesn't account for the opportunity cost of doing something else with that money though.

Thanks for bringing up a great point to consider.

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I'm not the most experienced here (closing on my second rental next month) but that is a big factor, right, especially considering what you said about all the upgrades/repairs that you've made?

I'd be tempted to keep and rent it out if:

-It's in a high-demand rental area.
-You don't need money from the sale to go toward your new home, renovations, other expenses.

Someone correct me if I'm wrong, but since it has been your primary residence you could always sell it in a year or two and not have to pay capital gains.

And since it is paid off you could tap into the equity later on to go toward future investment properties.