|
| Sunday, September 16, 2007 |
| Selling the rental house because of the kids... |
This Wall Street Journal Love & Money column: So Much to Do, Not Enough Time starts off talking about the reporters decision to sell his profitable rental house because renting it again would interfere with his kids soccer schedule. When suddenly the subject switches to his wife's decision to switch from full-time to part-time work, dispite having recently uprooted the family from New Jersey to Lousianna to further her career!
Ah, how complicated finances get when life starts to interfere with the plan... I am a bit confused by the logic the couple followed to conclude that selling the profitable rental was the way to go. She wants to cut down her hours to have more time to shuttle the kids around and clean the house. Do they need the money from the rental sale to supplement her lost income? Or is it strictly as a hedge in case he loses his income? I assume that as a Wall Street Journal employee he has to be worried about his job stability given the Rupert Mudock buyout of the paper. Probably not the best time to find out your spouse with the steady job suddenly wants to cut back on work. Amy and I bought our rental house in January 2006, a 1930s-era, two-bedroom bungalow in the oldest neighborhood in our hometown of Baton Rouge. We originally invested there because the area is gentrifying quickly.
We went into this affair with the expectation that we'd generate some nice income on the side, and slowly build some wealth over the years as the value of the property increased. And it was all playing out as expected. The monthly rental income exceeds our all-in costs by more than 40%, earning us more than $300 a month. The value of the house, meanwhile, has climbed decently in the time we've owned it.
[...]
I also ran some numbers in case we decided to hire a property-management company to handle all of this. I concluded that we'd actually generate greater income taking the accumulated equity from the sale and sticking it in an online savings account, although we'd miss out on some tax benefits and any further appreciation. Does he mean the profit AFTER deducting the management fees is less than the income generated from the online savings accounts or that the online savings account will give him more than $300 per month?
If the house is so painless to maintain, why does he need to pay a management company? He just needs to pay a broker a fee to find a new renter.
How can the renter afford to buy the house yet can't afford to rent it without a roommate?
Why does he need one years worth of salary as his emergency fund? Shouldn't he instead need one year of living expenses (which should be less than one years salary)?Labels: Money Stories |
| posted by Boston Gal @ 12:48 PM *
* Subscribe to Boston Gal's Open Wallet |
Links to this post:
|
| 4 Comments: |
-
BG, not everyone is cut out to be a landlord. For 6 years I rented my condo. I had a great tenant but
after a few 8 PM calls re problems, and then having to replace the heating unit for 4K, I decided it was time to sell. I lucked out- my tenant bought it. I never generated a lot of income doing the rental but the sale brought me lots of cash.
-
Hi Anonymous,
I am not saying he is wrong to sell the investment property - just that I don't fully understand his logic for doing it. If he had clearly stated that his rental is generating over $300 a month today, but after selling and putting the equity into an online savings account he will be generating $X a month... Perhaps I would understand the decision better. Not knowing the amount X represents is an important piece to this puzzle.
I know he cites family demands for not having time to deal with the property - but he contradicts himself by saying in two years of owning it he only had to rush over there once to unlock the door after the tenant locked himself out (which, was his choice to be nice and do that - most folks in that situation call a locksmith and since it was the tenants mistake the tenant pays...)
I can only guess that the real problem is replacing the tenant and feeling he does not have time to interview folks and show the unit because his every weekend is now booked with watching his children's soccer games.
-
You bring up good questions, Boston Gal, and I agree. I'm surprised he's ready to sell so quickly instead of just paying someone to find a new tenant. Especially considering the monthly rent roll and low-maintenance aspect of the property.
I wonder if he wants to cash out now because of speculation that housing prices will drop further. It's hard to say without knowing the numbers.
-
I live in the same town and I'm considering what I will do if I have to move. Whether to rent my home or sell. I know that the real estate market is down overall, but at the same time the real estate market here is booming after Hurricane Katrina. I'd like the idea of having real estate generating income but I don't know if it's as easy as some make it out to be. I'll know next year after I finish grad school and hopefully get a new job.
|
| |
| << Home |
| |
|
|
|
|
BG, not everyone is cut out to be a landlord. For 6 years I rented my condo. I had a great tenant but
after a few 8 PM calls re problems, and then having to replace the heating unit for 4K, I decided it was time to sell. I lucked out- my tenant bought it. I never generated a lot of income doing the rental but the sale brought me lots of cash.