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I have a rental property that was once a primary residence. Right now I keep it as a fall back position because it is a paid off place to live if I ever need a cheap place to live. The house has more than doubled in value since I bought it paid in cash 5 years ago, but of course other houses have gone up in value. The way I look at it though, is I'm just trading the house for another that is better for me personally.
I'm considering selling it for another house in a better location. Same city, but not on such a busy street. After fees and maybe having to add 10K to buy a similar sized house in a better location, I might be spending 15-20K out of pocket to make it happen, but isn't it worth it? I should be able to get higher rents and if I ever do decide to move back into it temporarily, I wouldn't have to deal with the traffic noise. Although, strangely the traffic keeps other problems away...
All depends on whether you can get higher rent, and whether appreciation would be higher.
my gut reaction would be it wouldn't be worth it. really only if you were planning to move there eventually long term.
As a rental, I don't have any experience, but main road close to things can be a plus to some demographics.
I don't know your area or any of your lcoation specific considerations. I have trouble with the 15-20K number, to me that wouldn't cover the transaction costs, nevermind the cost differential.
It's a small house, and I would only pay 5% transaction costs as opposed to 8% (including realtor fees and excise tax). So about 7.5K for that, and maybe 10K for a little touch up to sell it easier/for more.
I could always rearrange the rooms if I move back into it, so that the rooms I spend the most time in (living room, bedroom) are in the back of the house away from the street. The bedroom I slept in before was facing the back of the house and it really wasn't an issue in that room, especially with the fan on after hours. The road is pretty dead after 9PM, so...
I guess I don't NEED to trade it for a better house, at least not if I was only going to move back into it during hard times, but I don't know that I'd want to live there for 30 years of retirement. If I moved back into it, I could arrange it so that the noise is not as bad or noticeable (insulation, plug/play water feature inside, turn back bonus room into living room [has exterior door already]).
Figured I'd post that and bump the thread to see what others think.
I don't want to sound like a buttwad, but you're assuming that someone will want to buy your home on the busy street for double the value of what you paid. I would look at houses that are the same street that are for sale and see how long they stay on the market and what they get before deciding to sell the home.
If its not to your liking, then just do what you said and rearrange the house so the road noise won't drive you crazy if you eventually move back into it.
This is the one time I would recommend looking into a HELOC. Paid off rentals are asking for trouble so you should have a HELOC on the books even if you never use it, they show on county records as open loans because they are. A HELOC can act as a sort of deterrent to law suites because it shows your equity stake is minimal according to county records. I'd take 50-75% and buy a 2nd rental that way but that is just me and 1031 exchanges can be a pain sometimes.
I have a rental property that was once a primary residence. Right now I keep it as a fall back position because it is a paid off place to live if I ever need a cheap place to live. The house has more than doubled in value since I bought it paid in cash 5 years ago, but of course other houses have gone up in value. The way I look at it though, is I'm just trading the house for another that is better for me personally.
I'm considering selling it for another house in a better location. Same city, but not on such a busy street. After fees and maybe having to add 10K to buy a similar sized house in a better location, I might be spending 15-20K out of pocket to make it happen, but isn't it worth it? I should be able to get higher rents and if I ever do decide to move back into it temporarily, I wouldn't have to deal with the traffic noise. Although, strangely the traffic keeps other problems away...
Have you lived in the house for 2 of the last 5 years? If your gain would be tax-free that may be a consideration.
If you lived there the 1st 24 months of the last 5 years and there was significant appreciation, I'd sell it to take the gains tax free and reset the cost basis on to another property. Although you'd be paying other transaction cost, it'd probably be less than the capital gains.
I'd keep the current rental property that you own free and clear on the busy street and continue to rent it. No guarantee of higher rental rates on a quieter street.
I'd keep the current rental property that you own free and clear on the busy street and continue to rent it. No guarantee of higher rental rates on a quieter street.
No guarantees, but likely. That said, I miss living there sometimes, and it is the devil I know. It's walkable and close to transit and commuting routes, as well as all my hobbies. While the street noise is not ideal, I could make it work if I had to fall back on it for a few years.
While it is a cash cow as a rental and a good fall back position, it's not a place I'd want to live forever. Also, I am getting to the point where although high returns are nice, now I'm more worried about protecting my nest egg. I'd be better off taking 1-2% lower returns investing in a REIT index fund and never have to worry about it, since it is diversified.
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