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  • Rent or sell current real estate

    I am a current resident in my last year of training, first time poster here wanted to seek some opinion regarding my real estate options.

    I purchased a house 3 years ago with intention of staying in my residency area in Ohio for fellowship and beyond. Plan changed and now I will be moving out-of-state for a 320K/yr attending job. I plan on renting a place in the new state till I get my commencement bonus and save enough for a 20% down on new conventional mortgage. Was wondering if I should sell or rent out my current home handles by property managment that charged $80-90/mo.

    Home purchase price: $193,000. Put $30,000 down on physician's loan ARM 7/1 @ 3.950%
    $150K left on principle currently.
    Monthly mortgage: $1250K
    Estimate currently property value: $235K
    Estimated equity: 75K with LTV 66%
    Potential monthly rent if renting out: $1600 - $1800/mo

    Crunched some numbers, figured if I sell my home for listed price, taken into account cost fees and potential vacancy period I would say cost to sell would be wound $21-25K. Won't be making much of a profit at all compared to the downpayments and mortgage I already put in. Though I worry that if I already have an existing mortgage it would be difficulty for me to quality for new home loan. I am by no means expert in this area and any input would be appreciated.



  • #2
    Did you get the sales price estimate from realtor? In my area things are selling extremely fast and high making it an excellent time to sell.

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    • #3
      you may luck out bc its a sellers market right now, but your story should be highlighted for all the "I should buy during med school or residency" posters out there. Plans change, and even in a good market you can lose out, or have added stress. Also, in your new city don't rent "until you can get a conventional mortgage," but instead rent until you are confident and comfortable that your new job is a keeper and a good fit- it will take at least a year. But to your original question, how is the rental market, and how is your house comparable for the market if you end up keeping it and renting it? If you rent with a property manager, vet the property managing company well- they can be the difference between making or losing money while renting out your place.

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      • #4
        If you keep the current house as a rental, the numbers should work out reasonably well as an investment, assuming you get around $1750/month in rent, and assuming that your listed mortgage payment includes property taxes and insurance. But....

        This is a small investment and you need to have a reliable property manager or someone who can respond when needed to handle repairs and turnover. For one single home, it may not be worth the hassle. If you owned 10 similar homes, then you are talking about a significant investment that can return 25% per year (combined return including cash on cash, mortgage pay down, leveraged appreciation, all of which are tax protected) and could significantly move the needle on the growth of your net worth. Your investment return on this single property, all in, might be around +/-20k per year. Yes, that is tax free growth, but is it enough to make it worth the hassle? I did invest in real estate early in my career, and I do like the current 6 figure annual tax free cash flow, but that is based on a significant real estate portfolio built up over time.

        Bottom line, given the distance, do you value the simplicity of selling and moving on, or do you have local ties that would allow easy management of a remote investment property? In my view, unless you have someone qualified to manage the property who is local, sell!

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        • #5
          Did not hear you ran numbers on the property for taxes, insurance, maintenance and the taxes. If you do not sell in three years, you might be hit with some tax surprises.
          https://www.marketwatch.com/story/ho...rty-2019-10-04

          From what you described, it does not show like a whole lot of profit either way. I call that uncompensated risk. It also does not sound like you intend to really own rental property as an investment either.

          I would sell it in the up market. Probably a good thing to exit. Accidental rental property means you are lucky to get out with a breakeven.

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          • #6
            I would also sell given the market.

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            • #7
              I agree with the others that you should sell. Rentals at a distance are more difficult and with the hot seller's market you should do well on the sale. Since it has been your primary residence you won't pay any capital gains now but if you kept it as a rental and then sold in 5 years you would pay capital gains. Take the easy tax free money now and move on with your life into the new job without distraction.

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              • #8
                Sell within 3 years - no tax on profit, no more headache with tenants. Who knows how much longer they’ll be able to move in, not pay rent, and use COVID as the reason so you cannot evict. Dealing with this now - can’t wait to get past it all. We are applying for govt reimbursement but it’s a hassle I just don’t need right now (or any time lol)
                Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #9
                  Originally posted by LuxErebus View Post
                  I am a current resident in my last year of training, first time poster here wanted to seek some opinion regarding my real estate options.

                  I purchased a house 3 years ago with intention of staying in my residency area in Ohio for fellowship and beyond. Plan changed and now I will be moving out-of-state for a 320K/yr attending job. I plan on renting a place in the new state till I get my commencement bonus and save enough for a 20% down on new conventional mortgage. Was wondering if I should sell or rent out my current home handles by property managment that charged $80-90/mo.

                  Home purchase price: $193,000. Put $30,000 down on physician's loan ARM 7/1 @ 3.950%
                  $150K left on principle currently.
                  Monthly mortgage: $1250K
                  Estimate currently property value: $235K
                  Estimated equity: 75K with LTV 66%
                  Potential monthly rent if renting out: $1600 - $1800/mo

                  Crunched some numbers, figured if I sell my home for listed price, taken into account cost fees and potential vacancy period I would say cost to sell would be wound $21-25K. Won't be making much of a profit at all compared to the downpayments and mortgage I already put in. Though I worry that if I already have an existing mortgage it would be difficulty for me to quality for new home loan. I am by no means expert in this area and any input would be appreciated.

                  Of course, sell. And count yourself lucky you didn't loose your shirt (or at least umpteen thousands of dollar$). As already stated above, it is a great sellers market right now, being a long-distance landlord is not something to recommend to your worst enemy, especially to a busy professional.

                  Again (as if this needed to be said), this is yet another scenario that should be a stark warning for any residents or medical students looking to buy a house, please DO NOT. This person was uber lucky in his/her timing and even granted that, post real-estate and financial transaction costs, will only be up maybe 20-30K. For every person like the OP here, there is another who purchased at the wrong time and lost. Plans change, life happens, peace of mind and convenience of renting are hard to quantify but worth a ton.

                  Comment


                  • #10
                    I would keep it another 2 years. But I’d sell it before year 3.

                    But then I wouldn’t mind taking a loss either. I figure if I’ve paid the entry fee and can roll the dice another 2 times and if the expected return with each roll is positive long term, why not ?

                    Comment


                    • #11
                      Originally posted by Dont_know_mind View Post
                      I would keep it another 2 years. But I’d sell it before year 3.

                      But then I wouldn’t mind taking a loss either. I figure if I’ve paid the entry fee and can roll the dice another 2 times and if the expected return with each roll is positive long term, why not ?
                      Why not: as all the other posters stated, the major headache and hassle of dealing with being a remote landlord. Especially, as fellowship/early attendingship is when you establish yourself and those are critical years to your career when you really do not need extra distractions. Now if you had a stay at home spouse, particularly one with a real estate license or specific interest in managing real estate, then that would be another story.

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                      • #12
                        Thank you for all of your valuable comments. It seems that in my scenario I've lucked out due to current housing market and would be better off selling my property, avoid dealing with long-distance property management, leaving this headache behind for good without a loss.

                        I have to admit though when I made the purchase 3 years ago I took advantage of physician loan, low monthly mortgage that includes escrow, and I rented out my spare bedrooms to med students + Airbnb that would more than cover my mortgage 8 out of 12 months/year. I did enjoy my time of homeownership, but alas if I knew I would not be staying for 5 years or more I would be renting.

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