Round Rock home - lease or sell?

[scm53]

Originally Posted by Austin97

maintenance alone is 1-3% of the house value which will destroy any profit and eat into gains.

Less than the positive cash flow on the low end. And 3% is high based on the rentals I've owned and currently own. This is a newer home and won't be that high.

This is from austin-steves blog:

Austins 10 year appreciation is around 3.25%, round rock is 2.75

That is ANNUAL, not cumulative. From the same source:

Total Appreciation 1998 thru July 2006 = 34%

For eight years, including the first down three year stretch in twenty. So 50% over the next ten years isn't out of line at all.

Take into account

1) taxes on the sale (since it isnt a primary residence), you take a 35% haircut for ordinary income

False. Like any other long term investment, it is taxed at the capital gain tax rate. And ZERO if you do a 1031 exchange

2) Leverage, the only reason the owner makes so much relative to the investment is because of leverage of an original investment. You have to consider the impact of investing the original equity, not just the profit.

I was assuming there was no equity. Doesn't change the gain, or the appreciation - only the ROI.

3) maintenance almost completely eats away at any appreciation based profit.

Based on what?

4) liquidity - houses are very illiquid.

Agree. Note my response.

Responses embedded.

[vrr106]

scm53 and Austin97 - thanks for the discussion, exactly what I was looking for. Given the equity I have in the home, it's not quite a no-brainer to rent but I'll need to do more analysis.

scm53 - not sure what location/value your rentals are, but any input on quality of tenants you have seen would be useful. I will be moving out of state, so if I rent I need a hands off experience as much as possible.

[centralaustinite]

Originally Posted by vrr106

scm53 and Austin97 - thanks for the discussion, exactly what I was looking for. Given the equity I have in the home, it's not quite a no-brainer to rent but I'll need to do more analysis.

scm53 - not sure what location/value your rentals are, but any input on quality of tenants you have seen would be useful. I will be moving out of state, so if I rent I need a hands off experience as much as possible.

And this is why you should sell! Paying someone to manage/maintain the property and find tenants will eat away your profits! And just one bad tenant could put you in the hole.

[mark311]

Originally Posted by centralaustinite

And this is why you should sell! Paying someone to manage/maintain the property and find tenants will eat away your profits! And just one bad tenant could put you in the hole.

You figure a new roof and a new AC could easily set you back $15K to $20K (combined) every 15 years. If either of those are needed within the next couple years, you would want to plan for those expenses. And if a new AC is needed, you really have to get it replaced immediately for a tenant. So you would HAVE to come up with probably $5K at a moments notice.

[scm53]

Originally Posted by vrr106

scm53 and Austin97 - thanks for the discussion, exactly what I was looking for. Given the equity I have in the home, it's not quite a no-brainer to rent but I'll need to do more analysis.

scm53 - not sure what location/value your rentals are, but any input on quality of tenants you have seen would be useful. I will be moving out of state, so if I rent I need a hands off experience as much as possible.

I haven't had a rental in Austin in almost twenty years - not because I feared anything or didn't want to manage OOS. Just that most of my rentals were primary residences that I converted when I moved. Exchanged the two here. Current one is OOS, and we have it managed. I'd pick a good rental agent. Austin-steve here looks like a good one. I'd start with him. If not, pick any large RE office, ask for their property mgmt section, AND GET REFERRALS - several, from current owners. I have even used agents when I lived in the town, to keep my emotional investment detached.

Pick a couple you'd consider and sit down and talk. They'll know the market, can tell you the pros and cons, and be much better souce than me, the eternal Pollyanna, or the chicken littles here.

[BatWing]

Schlitterbahn is coming to the area. don't sell it until the value jumps after they break ground.

[centralaustinite]

Originally Posted by scm53

I'd pick a good rental agent. Austin-steve here looks like a good one. I'd start with him. If not, pick any large RE office, ask for their property mgmt section, AND GET REFERRALS - several, from current owners. I have even used agents when I lived in the town, to keep my emotional investment detached.

Pick a couple you'd consider and sit down and talk. They'll know the market, can tell you the pros and cons, and be much better souce than me, the eternal Pollyanna, or the chicken littles here.

This is excellent advice! Seconded by a chicken little! This is a big decision, get advice from real people, not just the intertubes!

[10scoachrick]

Originally Posted by BatWing

Schlitterbahn is coming to the area. don't sell it until the value jumps after they break ground.

Must be fun living in a past make-believe world.

[BatWing]

Originally Posted by 10scoachrick

Must be fun living in a past make-believe world.

How far is Reality from where you live?

as of Jan 2013 - "..Cedar Park officials say the city and Schlitterbahn are still discussing the project."

cut and past and read up...

http://austin.ynn.com/content/top_st...-sink-or-swim-

[EzPeterson]

That's six months ago. It's dead.