Oh, the age old question: to be or not to be, that is the question!
Only I am changing it up a little. My version is: to sell or not to sell, that is the question!
What exactly am I contemplating selling you ask? None other than my rental property. My passive income stream. My investment for my future….
If you find yourself in my shoes, then you’ll enjoy my contemplation points below. And if you aren’t in my shoes…well you will still enjoy it 🙂 I’ve broken it down into 3 pros & 3 cons to help me get better perspective. If I’m missing any really great points, please comment at the end and let me know!
Pro #1 – Diversify into new investments
This is a really big pro for me. I enjoy learning about new investments. You will see my Pinterest account filtered with the latest investment ideas I find fascinating. Don’t believe? Go see for yourself! I’ll wait here until you get back…
…see? I am an investment junkie! So the idea of trying my hand at new investments is exciting. The newest thing I am currently tinkering with is dividend investing. I am by no means a stock market expert (or even at the intermediate level!), but the idea of making money quarterly off of the stock and have the stock potentially rise in value is interesting to me. It can create a sort of passive income stream, though you do need to own quite a bit to see much income from it. For now, I reinvest my dividends to buy additional shares of stock.
Pro #2 – Pay down debts & mortgage
We recently bought a new house in a different town due to job changes. We ended up putting minimal down, and then using our cash to do some renovations. If I sell our rental property, we could make a larger principal payment on our loan and no longer have to pay the dreaded PMI insurance.
While I don’t always suggest people make large principal payments on loans, this is an exception. Usually, the monthly payments on your loan won’t change even if you make a large payment, so I am weary of doing anything like that without a solid savings account and all other debts paid down. This case is a little different though. Since the PMI will be removed after 20% is paid down on the principal, our monthly payment would be lowered.
So even though we lose monthly cash flow from the rental property, we gain some of that back in lower monthly payments on our mortgage and less interest paid over the life of the loan.
Pro #3 – Less stress & headache
Most of the time the rental property doesn’t cause us much stress & headache. We have a property manager who deals with the day to day management of it. When it comes to repairs or move in/move out, then the stress & headache comes.
Our tenants moved out a little less than a month ago, and we are stilll working on gett the property to a condition where we could sell or rent it. We are paying for some of the work to be done (carpet, plumbing, etc) while other stuff we are doing ourselves (cleaning – ewww, painting, etc). On top of it all, the security deposit the tenants paid at the start of their lease is not covering all of the costs we are now incurring.
Now add all of that to the fact that my husband and I both work full time. Scheduling repairs, getting work completed, and meeting with professionals gets very tricky when you go to work most days of the week! When the property is ready to be rented or sold, then the stress levels will lower around the here. Until then, a lot of yoga and meditation is happening!
Con #1 – Lose passive income
This one is the hardest one for me to swallow. I am a HUGE proponent of passive income. There is nothing like getting a paycheck every month from zero hours of work! Of course you put your time in up front, and usually a good chunk of money, but once things are in place, you reap the rewards.
Currently, we have a cash flow of a little over $400 from our rental property. Add that to the principal paydown on the mortgage each month (about $200-$250 a month) and that means we are seeing our net worth go up $600-700 a month. Oh and that doesn’t even account for appreciate of the property that we hope we get!
See where I am coming from? If I decide selling the rental is what is best for us, I will be chomping at the bit to find another source of passive income to replace it with. After all, working for the man starts to get a little draining at times. Don’t get me wrong, I am ever grateful to have a great job with a wonderful company, but the freedom that could be had with passive income is an amazing thought and motivator!
Con #2 – No longer have a long term real estate investment
Real estate has always been a passion of mine. I even worked as a real estate agent for a few years before I had kids. (It’s a tough job once you have a family!). Houses tell such amazing stories, and they can be transformed into such amazing places. It is fascinating to see a house that needs loving care turned into an amazingly beautiful property that will be a home to someone for years to come.
With the rental, I become a part of that! If you haven’t read my post about buying my rental property, then you might not be aware that my rental property was the first piece of real estate owned! I bought it while we were renting and hadn’t even bought our own house yet. Some people thought I was insane, but it just felt right! You can read about the journey here: Why I bought a rental property before my primary residence.
It will be heartbreaking to watch that first piece of real estate owned being sold. My first large investment. My first slice of the real estate pie. I currently own 2 other pieces of real estate, so I won’t be out of the game completely. But it’s something about the first piece that really makes it difficult!
Con #3 – May lose out on rising property values
Have you guys seen the property values lately? I don’t know if its the same where you live, but the prices are on a steady climb! The combination of low interest rates and low inventory on the market are making houses sell for great prices and extremely fast! No one can determine if this climb will continue or not. If we sell the property and houses prices go up another 10-15%, I might be kicking myself for not waiting!
I know the opposite can be true too, the prices could go down, it’s just not something I see happening anytime in the near future. Selling now it almost like selling a stock as the price is climbing, you could potentially lose out on a large gain. Selling for more means more money in our pockets that can be used for more investments.
So those are the 3 pros and cons I have outlined for myself in making the decision to sell my rental property or keep it around for a while longer. I will wrestle with this decision for another week or 2, and then it will be time to answer the question: to sell or not to sell!