Hi,
A newbie here! Own a home that’s almost paid off, FMA : 420K with taxes 7000. Currently moved to anothe home barely 1 mile away from previous home. Getting a rental offer of monthly rent of $3000 for 3 year corporate lease. Cap rate coming to be 6.27%. Can’t decide, should I sell or rent it out. Capital gain so far is barely 20K, if that is. Can’t decide : Should I rent or sell?
If I do rent it : should I lock myself in $ 3000/month rent for 3 years (having a safety of continued renter)or have a clause of increased rent after 2 years OR have a lease of 2 years only? Appreciate thoughts from those who have been in real estate investment for while.
It’s the famous I don’t know where the house is and that would generally affect my answer response but as a general answer I would sign the lease if the company is solid and put a clause in the lease that the property will be returned at the end of the lease in the same condition, or better, than it was at the initiation of the lease and any and all repairs for anything shall be done at the expense of the tenant.
Once had a sports team rent a place for one of their stars, and when he left it looked like 27 families of welfare trash had hit and run after a very long riot. Took a month and a ton of cash to put the home back into the condition they had got it. Yes the team paid when I suggested a TV crew and a few reporters from the paper might be interested in looking at the house now, and then reviewing the video taken just before move in. Plus coverage at the trial would be nice since small claims court couldn’t be used because of the dollar amount.
Wow!!! That’s some serious leverage…
It’s interesting that you took a video of the house ‘before’ they moved in. A video is a little harder to show in court, I’m sure, but it’s more persuasive and dramatic than a photograph.
Javipa
Actually the video was a fluke. I started as an investor for 10 years and then added a real estate brokers license. A company that wanted to sell franchises for real estate brokerage approached me, their concept was buyer prospects would come into the office into a nice tea room setting and select properties to look at from the videos of your listings.
Of course they wanted to do a sample one and I happened to choose that property because it was empty for a few more days and I wouldn’t be disturbing anyone. But after that, pictures were SOP and we had the tenant date and initial the back of them.
It sounds like a nice house. But, in terms of investing, it would be much more profitable to sell the property and use the proceeds to acquire as many units as possible. With 400k, you could potentially buy 20 or more houses or do a 1031 exchange and use the money as a down payment on an apartment building, if you are feeling ambitious.
arubaba,
You’re in a really fortunate, opportunity-laden position.
Ask yourself (not necessarily in this order):
How much risk do I want to take?
How much leverage am I comfortable assuming?
What are my end-goals?
How will keeping the property and renting it effect my end-goals?
How will selling and leveraging into something bigger effect my end-goals?
I’ve taken free and clear houses and leveraged them into apartments. I came across an apartment owner that didn’t know an eviction from an evacuation and offered him my free and clear, rented rental, as a down payment, and took over his mortgage. We traded deeds. I bought his building Sub2, and he got my house with a performing renter in it. It was win/win. My net income on that investment skyrocketed from a net of $500/mo to $2200/mo. That was just a $30k trade…and the seller paid the real estate agent out of pocket.
Interestingly, the agent representing the seller originally sold this beast of a building to the seller just a few months earlier…and when the seller started crashing and burning, the agent felt guilty about the deal, and creatively helped the seller get out of the deal.
I’m not saying you should do this, but a free and clear house will provide you some amazing options if you open your mind to the possibilities. :biggrin
Thanks for all the input every one. I have decided to rent it. Shell company is backing up the renter for 4 years. I had been thinking to get in rental for a while. This way, I know the house. I’m not loosing the money in a sale transection. Home is located in northern suburb of Pittsurgh. While I know it will sell for sure as soon as the season starts again, however, with drilling companies bringing 100’s of employees here, it’s easier to rent as well. I know the house is in good shape ( I maintained it, lived in it). May refi it again to get some tax benefit.
Hopefully, my experience will be encouraging enough to purchase few more units.