Rent or Sell?
- Thread starter 2tall79
- Start date
YeshuaIsa53
Member
Wish you guys a good situation and an easy decision.
Sell and invest...let younger folks deal with agents and tenants
Robert
Robert
I would leave the house vacant with automatic lights and wifi cameras. Ask your trusted neighbors to keep an eye on it.
Give your move 6 mo to a year in order to see how things pan out. Remember that young folk often relocate for work or whim. Then what?
Good luck
Give your move 6 mo to a year in order to see how things pan out. Remember that young folk often relocate for work or whim. Then what?
Good luck
SELL
I have had to many problem renters.
Finally sold to an honest renter on a Land Contract.
Bekeart
I have had to many problem renters.
Finally sold to an honest renter on a Land Contract.
Bekeart
CAJUNLAWYER
Member
If I was your age and wanted a side hustle-being a landlord ain't the way to go. Go back and re-read Erics post. I've seen all these things in representing poor people who try to get the "easy money" of landlords. There are renters out there that make Satan look like the Sunday Preacher. Sell it and invest the money
OP
2tall79
US Veteran
"Kent is infested with crime not to mention homeless squatters"
True that. This is the second main reason we're moving.
True that. This is the second main reason we're moving.
Huskerguy
Member
I am almost 71, we have two rental units. There are pros and cons and lots to consider in all of this.
Will the kids always stay where they are now? Guarantees?
I am going to make some assumptions and probably ask some questions/give some opinions.
Hiring the management company is not a bad idea if you do not want to handle all of that. I assume they advertise, show, do move in inspections, gather fees, deposit money, do checks and move outs? I would ask who they have do work if you need it. Do they do regular checks on the home i..e smoke detectors, clean gutters, fallen limbs, etc. I assume you will pay for that stuff. It does add up.
As for income, it is considered passive income so you are somewhat limited as to what you can deduct. Certainly all fees and costs associated with the home. You cannot deduct any of your labor.
Also assume you will be working on a 1 year lease. What would happen should you need to move back in that time?
I know the odds of this happening are small but there is always the issue of what happens to things if something happens to both of you? If you have a will only, the rental is tied up in probate which means some things like repairs, kicking out tenants, etc can become tricky as no one actually manages the property besides the court. If you have a trust, that is different and the property goes to the trustees you name and they can take care of any including rent, repairs, even getting into your accounts.
Back to the income part, yes you will have income to pay taxes on but you will also have expenses to deduct. Any repairs you make that are major like a new HVAC system have a specified depreciation schedule so you will want to run this all by an accountant.
On our two units, we set financial goals of netting 13% on our units and have done that consistently. We also do all of our own work aside from roofs and HVAC and my wife does all of our books. By the time I am 75 I expect we will begin to consider selling them which triggers a capital gains. You may also want to check into that piece, going from a single family home to commercial property, not sure how the capital gains works.
Will the kids always stay where they are now? Guarantees?
I am going to make some assumptions and probably ask some questions/give some opinions.
Hiring the management company is not a bad idea if you do not want to handle all of that. I assume they advertise, show, do move in inspections, gather fees, deposit money, do checks and move outs? I would ask who they have do work if you need it. Do they do regular checks on the home i..e smoke detectors, clean gutters, fallen limbs, etc. I assume you will pay for that stuff. It does add up.
As for income, it is considered passive income so you are somewhat limited as to what you can deduct. Certainly all fees and costs associated with the home. You cannot deduct any of your labor.
Also assume you will be working on a 1 year lease. What would happen should you need to move back in that time?
I know the odds of this happening are small but there is always the issue of what happens to things if something happens to both of you? If you have a will only, the rental is tied up in probate which means some things like repairs, kicking out tenants, etc can become tricky as no one actually manages the property besides the court. If you have a trust, that is different and the property goes to the trustees you name and they can take care of any including rent, repairs, even getting into your accounts.
Back to the income part, yes you will have income to pay taxes on but you will also have expenses to deduct. Any repairs you make that are major like a new HVAC system have a specified depreciation schedule so you will want to run this all by an accountant.
On our two units, we set financial goals of netting 13% on our units and have done that consistently. We also do all of our own work aside from roofs and HVAC and my wife does all of our books. By the time I am 75 I expect we will begin to consider selling them which triggers a capital gains. You may also want to check into that piece, going from a single family home to commercial property, not sure how the capital gains works.
Listen to the two lawyers who posted in this thread.
DWalt
Member
When I was considerably younger, I made a decision to rent my house when I was transferred because I knew that real estate values in the area would be rising rapidly in that location. I rented to an older retired couple who I checked out thoroughly. That worked well for around four years, but the couple decided to move to be closer to their kids. At that point, I decided it was time to sell, which I did. I made a reasonably good profit on the sale. The downside was I had to do considerable cleaning and fixing up of the house before I could sell it. No serious damage, mainly just neglect, but it took several weeks to get the house into a condition where it could be shown. Cleaning, painting, carpet cleaning, yard work, etc. But at your age I recommend you sell, not rent. You do not need the headaches.
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OP
2tall79
US Veteran
". By the time I am 75 I expect we will begin to consider selling them which triggers a capital gains. You may also want to check into that piece, going from a single family home to commercial property, not sure how the capital gains works.
As of now, there is no capital gains tax on the sale of real estate in Washington. But some folks are trying hard to change that.
As of now, there is no capital gains tax on the sale of real estate in Washington. But some folks are trying hard to change that.
Third lawyer. Agrees with Cajun lawyer and especially S&WChad. Repair headaches, tax headaches, who needs that at your age. Being a real estate investor has passed you by - go enjoy yourself.
A big check, tax-free, and a reasonable interest rate. You'll never spend it all, but you will not have headaches when looking back.
If I can presume that your home is sufficiently valuable, do not put all of the funds into one bank account. FDIC insurance per account is currently $250K, IIRC. If you are just placing the funds into bank accounts sit with the bank manager to determine how to open up more than one insured account (assuming you use just one bank). It's actually fairly easy.
Good luck!
A big check, tax-free, and a reasonable interest rate. You'll never spend it all, but you will not have headaches when looking back.
If I can presume that your home is sufficiently valuable, do not put all of the funds into one bank account. FDIC insurance per account is currently $250K, IIRC. If you are just placing the funds into bank accounts sit with the bank manager to determine how to open up more than one insured account (assuming you use just one bank). It's actually fairly easy.
Good luck!
My wife's sister is a good looking gal who never married and owns 12 rent houses and they were all paid off by the time she retired from the electric company debt free at 52 and hasn't had a job since. She has a LOT of monthly income and hardly ever has a problem with a tenant because she's smart and spends significant time researching them before she gives them a lease. She has a pretty good life as a landlord.
DWalt
Member
FDIC insurance is for each depositor, not each account. A joint bank account for a couple is insured for up to $500K. Joint Accounts | FDIC. There are ways to structure accounts to get even larger account amounts covered. Any bank will tell you how. But with that much money, there are much better places to place your cash than in a bank deposit.
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LoboGunLeather
US Veteran
If you have any emotional attachment to the home I would advise against renting it out. If you have any thought of ever living there again, or leaving the property to a loved one, I advise against renting it out.
Rental property should be an asset that is viewed and evaluated as nothing more than any other asset. There will always be costs and disappointments. Good tenants and good management agents are the exception, not the general rule. You remain at risk every day so you must make every decision based on logic and common sense, not emotion or hope.
My 2 cents worth.
Rental property should be an asset that is viewed and evaluated as nothing more than any other asset. There will always be costs and disappointments. Good tenants and good management agents are the exception, not the general rule. You remain at risk every day so you must make every decision based on logic and common sense, not emotion or hope.
My 2 cents worth.
I'm also in Western Washington, but way up North as you mention. A couple of observations: Landlord laws in this region greatly favor the renter. If you've watched the local news, you've probably seen the stories of deadbeat renters and the landlord takes the financial hit. A property management company might help you navigate the messy laws and regulations. However, even they have to go by the book.
Next thought is capital gains. There can be a benefit to selling the house reinvesting the proceeds in another house within a set time period. The other side of that coin is if you retain ownership and leave it to your heirs, they benefit from a stepped up capital gains basis.
I am not a real estate investor, landlord or tax advisor so I suggest you get professional advice. I did go through a number of these issues which is why I suggest you step carefully.
Next thought is capital gains. There can be a benefit to selling the house reinvesting the proceeds in another house within a set time period. The other side of that coin is if you retain ownership and leave it to your heirs, they benefit from a stepped up capital gains basis.
I am not a real estate investor, landlord or tax advisor so I suggest you get professional advice. I did go through a number of these issues which is why I suggest you step carefully.
abigails&w
Member
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Sell
OP, I see you are in Kent, WA. Look for youtube videos with renters that stopped paying rent and could not be evicted. Personally, if it were me, I would sell.
OP, I see you are in Kent, WA. Look for youtube videos with renters that stopped paying rent and could not be evicted. Personally, if it were me, I would sell.
[ame]https://m.youtube.com/watch?v=i2uu6NF2inY[/ame]
Doug M.
Member
4th lawyer. Same advice. The hassles of tenants and the risks associated with them are too great. We rented out this house for a while after I left this office and did not need it, but we did so to one of my former colleagues well below market rate because she was trust worthy. The laws in this state do not work well for landlords, and local ordinances make that worse.
To me, 60 miles generally is no big deal but from Kent to someplace 60 miles north's likely to be a long annoying trip due to congestion. Kent was ok 30 years ago, but in large part is a typical western WA hellhole. I avoid going over the pass unless unavoidable. Frankly, Snohomish and other adjacent counties are going down fast and are staggeringly expensive.
Sadly, we are being infested with west siders who are bringing their flaws and ruining this community. It is now the most expensive place east of the pass and more so than most of the west side counties.
To me, 60 miles generally is no big deal but from Kent to someplace 60 miles north's likely to be a long annoying trip due to congestion. Kent was ok 30 years ago, but in large part is a typical western WA hellhole. I avoid going over the pass unless unavoidable. Frankly, Snohomish and other adjacent counties are going down fast and are staggeringly expensive.
Sadly, we are being infested with west siders who are bringing their flaws and ruining this community. It is now the most expensive place east of the pass and more so than most of the west side counties.
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