Contemplating whether to rent or sell a home in Northern VA (tenant, investment)
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Moving to a new home soon, contemplating whether or not the current, primary residence is best SOLD or RENTED. Here are some details:
* 15 years old.
* Single car garage townhouse.
* Maintained very well with about $50K worth of upgrades done in the last 2 years (was planning to live here a while before there was a change of heart).
* Located in Ashburn, VA about a mile from the "Loudoun One" project (Loudoun County Parkway and Route 7).
* Expected rent: $1,800/month
* Expected sale price: about $325K
** Highest we have seen the price go (in the peak/best of markets): $465K.
* Rent would cover mortgage very comfortably.
What would be a prudent thing to do from an investment standpoint?
NOTE: Reposting it here as there may be some general investment advice (even if not NoVA specific).
Given Northern VA rents are only moving higher in Northern VA and our area is in the top 3 areas in the nation for appreciation, I can't fathom why you would want to sell. Are you upside down? Even if not, it looks like you have more to gain by hanging on than selling.
I sorta doubt that rents are going higher. The wind down of the Iraq think is going to effect defense sector spending. More immediately the failure of the "super committee" means unrestricted cuts in defense spending are going to hit HARD.
...contemplating whether or not the current, primary residence is best SOLD or RENTED.
Try selling it. See what price you can get for it *as is*.
Do no more than the thorough clear and clean and paint job and general fixing...
that would be required if you were to eventually rent it out and make it "show well".
If you can get anything close to a decent enough number... take the money and run.
Quote:
What would be a prudent thing to do from an investment standpoint?
Decide whether you really WANT to be a landlord.
Then think about that again.
Questions..where is your new home? Will you be a local landlord or doing it from 100's of miles away? Will you hire a property mgmt company or do it yourself? Are you familiar with state landlord tenant laws?
I sorta doubt that rents are going higher. The wind down of the Iraq think is going to effect defense sector spending. More immediately the failure of the "super committee" means unrestricted cuts in defense spending are going to hit HARD.
I would try to sell ASAP...
Agreed. The DC area is probably the biggest bubble of them all.
Some of my friends are defense contractor makin very good money. Try all are trying to apply for government jobs because defense cuts are coming.
Harder to let go of government employee than defense contractor letting u go.
Ashburn is one of the outer burbs and not inside the beltway. If you can sell it do it.
Renting sounds like the panacea for all homeowners who can't seem to sell their homes.
In the end, i would think it is a nightmare waiting to happen.
First if all, you have depreciation, and capital gains to worry about. The longer you rent, the higher the capital gains.
Is it mortgaged? The bank thinks it is your primary residence? ooops! They find out it is not, and the mortgage gets pulled right away.
Once you rent it is a commercial property. Insurance escalates accordingly.
Maintenance? Who is going to do this?
You going to screen tennants?
Three years down the road and it needs $25,000 for new paint, floors, bathroom and kitchen remodels cause the tennats weren't, well, the most wholesome. Can You deal with that?
If you approach it casually you might be lucky, avoid any scrutiny, and have a good experience. The IRS and the Bank know nuttin.
If you do it correctly and legally (most do not...they simply 'rent it') you have a whole new experience in store.
Depends on how well, if at all, you wish to sleep at night.
Sell it and move along. A rental is always a rental.....and they generally sell as such.
...First if all, you have depreciation, and capital gains to worry about. The longer you rent, the higher the capital gains.
Can you explain your comment? You seem to be implying this is bad. The only way to have higher capital gains is if the value of the investment has gone up over time. That's good. If you hold a capital asset longer than one year, you will have lower capital gain tax rate when sold (with current tax law). Of course, assuming you can sell it for a net profit.
It would be a good idea to consult with a tax adviser on the tax impact of a rental.
Edit to add: Perhaps you are referring to the loss of the homeowner's capital gains exemption if no longer a primary residence? Yes, that should be taken into account.
Is it mortgaged? The bank thinks it is your primary residence? ooops! They find out it is not, and the mortgage gets pulled right away.
Highly unlikely to happen. In any case, most loans that have any sort of primary residence requirement usually have a time limitation of less than a year.
Once you rent it is a commercial property. Insurance escalates accordingly.
Actually, landlord insurance rates are very reasonable, covering the structure. The tenant will insure their possessions.
...
Comments above.
The OP should consider all the expenses of a rental in calculating potential net profit as a rental. Taxes, insurance, ongoing maintenance, management fees (if applicable), vacancy rates, etc.
Renting sounds like the panacea for all homeowners who can't seem to sell their homes.
Like us..moved and after 8 mo on market had to rent to keep from losing.
In the end, i would think it is a nightmare waiting to happen.
It was and is! We need to be able to count rent as income to purchase another house. We are one late rent payment away from not getting into a permanent home. Talk about stress.
Once you rent it is a commercial property. Insurance escalates accordingly.
Ours did! So did our property taxes because we lost homestead exemption.
Maintenance? Who is going to do this?
Family close by have stopped answering the phone. We had to pay $650 for a small roof leak to be repaired.
You going to screen tennants?
We did..thought we were good judges of character. Well..Ha Good jobs and friendliness DO NOT mean people will pay their rent on time.
Three years down the road and it needs $25,000 for new paint, floors, bathroom and kitchen remodels cause the tennats weren't, well, the most wholesome. Can You deal with that?
We are 1.5 yrs down the road and looking at a chunk of change to get it anywhere near the condition it was in when we rented. We don't WANT to deal with it..too bad though.
Depends on how well, if at all, you wish to sleep at night.
We wish to sleep well..but we don't..with a peaceful night not in sight.
Sell it and move along. A rental is always a rental.....and they generally sell as such.
Ted Bear nailed it!!!!! I added my own answers to his questions to give you some perspective from someone who has done it. We consider it a huge mistake..sell while you can.
Take a moment to read through CD's Renting Forum and you'll see that renting isn;t what many novice rent because I can;t sell landlords thought it was going to be. Pay attention to all the LL who had the perfect tenant, the best family and friends to look after the property, the best pricing structure, etc and you'll see how many wished they never did it (or at least wished they used a PMC and not try it on their own).
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I added my own answers to his questions to give you some perspective from someone who has done it. We consider it a huge mistake..sell while you can.
