Our current home in southern California is our first house, and we have a strong emotional attachment to it based on that fact alone. On top of that, we have put an incredible amount of sweat equity into this house, which built an even stronger attachment to it. You see, the house had been severely neglected by the previous owners, who owned it for 15 years. From all appearances, they did the bare minimum to keep the house standing, and nothing more. For example, the 150 foot fence along the south side of our property was literally held up by string, and I don’t think they changed the furnace filter during their 15 years of ownership. All this meant there were lots of issues, or opportunities to bond with the house, that needed to be addressed. Over the last four years we have completed literally hundreds of projects ourselves and addressed virtually every one of these issues, while at the same time tailoring the house to our specific tastes.
|"Bonding" with our new drawer slides.|
If we choose to rent out our house there will inevitably be hassles associated with it. Even in the extremely unlikely event we find the perfect tenants who don’t damage the house, get along with the neighbors, never move, and pay rent on time every time, there will still be normal maintenance that will have to be performed. Since I don’t really trust any repairmen to do a good job and not rip me off, I would have to fix everything myself, which would be a huge inconvenience when we live a couple hundred miles away.
We could hire a property manager, but I really don’t want to pay for that. It might even cause the property to have a negative cash flow, at least for a couple years, which definitely isn’t something we want.
Dollars and Cents
The smart way to make this decision is to look at the financial impact of both options, and after running a bunch of numbers the results are pretty interesting. Selling gives us a lump sum that would compound over time, whereas renting would basically break even in the short term, but eventually generate a decent cash flow. Over the long term (and based on a bunch of assumptions like the rate of return on investments, the increase in property values and rents, and projected maintenance costs) both options come out surprisingly even, so it makes sense to go with the option that requires the least effort, which is selling.
I will note that despite the conclusion we have come to for our SoCal house, I am not opposed to the idea of becoming a landlord. In fact, if we do end up selling, I’m considering using some of the proceeds to purchase a rental property, however it would have to be near to our new home so I could keep a closer eye on it and more easily handle any issues that arise.
Are we crazy for selling instead of renting? Let us know in the comments
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