[USER]

I am the owner and it has been a rental property for 5 years.

That decision created a lot of family turmoil.

Now I’m looking to sell and I want to be sensitive to how I share this news.

There’s still a mortgage and there’s 16 years left before maturity.

I’m within 10 years of retirement.

I want to make good choices towards being financially independent.

I was wondering if it is wise to sell the property now?

Doing the math, It will take 20 years of the current rental income to match the net gains if sold today?

Understanding that as the mortgage pays down the rental income will grown but I am wondering if it may be better to invest the net earnings following the sale.

It seems simple enough but I’m wondering if I’m missing any pros and cons.

[Shatel]

They will probably take it hard but you can soften the blow by asking them if they would like to purchase it. If not, sell it.

[Rachel]

Is this an ideal investment property. Sounds like not likely. If you would want an investment property sell this one and do a transfer to another investment property that is more ideal. If you don’t want an investment property then sell it!

[Michael]

Does the family have anything other than emotional investment in the property? If it’s simple sentimentality, offer to sell it to family first. If they pass… put it on the market.

[Christina]

Since you have rented it for 5 years already, you have missed the window for capital gains exemption. You will be paying cap gains tax – talk to your accountant to see what that number is.

Who is the family? Why would they be upset about the sale? Like others have said, offer to sell to them first. In the end, you need to look out for yourself and do what’s best for you.

If you don’t want to be a landlord, then sell the property and invest the proceeds. You don’t need real estate to reach FIRE. Your mortgage may be paid down, rental income increase, but so will the income tax on the rental income and maintenance costs as the property gets older. I’d sell and move on with life.

[Bill]

Just tell them you are tired of being a landlord- tenants, repairs, taxes etc. Offer to let them be first in line for the sale. If they are actually so concerned about “keeping it in the family” , they can figure out a way to do so.

[Amanda]

We sold our rental 2 years ago. I had just wanted to be free from 2 mortgages (primary house and the rental). 2 years later, I REALLY wish we would have kept it. It would have been paid off in a few more years from now, and though we netted $50 each month (but then made sure to net $0 after expenses at the end of the year), a paid for property seems more valuable to me now that getting $ out of it to pay off debt, etc. Plus, I didn’t mind being a landlord. It was WAY easier than the one time we used a property manager.

I don’t have an answer for you, but know that I personally regret selling our rental.

[Amanda]

Is it a lake home or some other type of vacation home that you could make it an airbnb and family could use it at times and you could still make more income off of it?

After my dad died I begged my nephew to buy the farmhouse. I even offered to cosign the loan with him. I told him that someday he would really want it. But he didn’t listen. Now just a few years later he definitely wishes he had bought it. It was in a very rural area so it didn’t make sense for me to buy it as a rental property. Sometimes you have to do what makes the most sense despite our sentimental feelings.

[Heather]

Some of this depends on the market the rental is in. With interest rates high it has pushed many buyers to the sidelines. This has decreased demand and put sellers in a less favorable negotiating position. You might ride out this latest wave, let things settle down and sell down the road for more $$.

[Cris]

I’m always on the side of sell a home. But I’ve been a homeowner twice over and I don’t want real estate in my portfolio anymore. Take the profits, buy VTSAX and chill until you retire.

[Heather]

Google the term “return on equity” – thats the cash flow annually + the principal pay down of the mortgage divided by the total equity you have in the property. Is that number higher or lower than returns in the stock market (8-10%) or worse, better than what risk free treasury bonds are paying (5%)?. If not it’s probably time to sell. This ROE number goes down the longer you own it, but the reason an investor might keep it is because the income is all they care about (IE they own a big apartment building, the mortgage is paid off or leverage is low and they live fat off the buildings cash flow) . Sounds like your income is pretty slim as it is as a single family house. This is the objective way to analyze this situation. Most will say “why sell it, it’s making money!?” But little do they see the major expenses that pop up and how little a property makes after the other little stuff, especially against how much is stuck in the house as equity. You own the thing and if its become a burden, its well within your right to move on. Sentiment and sound financial planning do not mix. As others have said you also could offer it to the family to buy and let them deal with it.

[Author]

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