Well, the most critical issue here is that your annual income calculation is off by about $10000. $44000 - $5000 - $5000 - $1500 - $150 - $11000 = $21350.The capital gains on this house is only $70k. The equity in the house is only $125,000, after realtor fees to sell I would net around $100k. If I took the $100k tax free and I put it in the S&P500, let's say I would make ~$7,000 per year.
My mortgage rate is 2.875%, 30 year fixed for all those asking with approximately 24 years left on the mortgage.
If I do a rental I would make $4,000 * 11 months (assume 1 month of vacancy) = $44,000
10% of property rent in management fees = $5,000
Maintenance per year = $5,000 (the house is only 6 years old and actual cumulative maintenance over the past 6 years has been $5,000, so I'm hoping this is a conservative estimate)
Homeowner's insurance per year = $1,500 (I assume 50% increase from my current rates)
Property Taxes per year= $150 (this is tax abated by the city until 2030, there is no owner occupied stipulation or anything like that)
Mortgage Interest Expense = $11,000
That gets me to $31,000 per year. Of course $11,000 of that is mandatory investment into the equity of the house through the mortgage so the cash flow is $20,000 per year.
So I'm getting $31,000 per year plus maybe an additional $5,000 per year in property appreciation (1% of $500,000).
On the equity I have in my house of $125,000, that's approximately a 28% return per year. On the equity adjusted for realtor fees of $100k in actual investable proceeds, that's almost a 35% return per year. I feel like it's almost a no-brainer to rent in this situation.
If you are saying I should sell, I would love to hear your numerical arguments as to why I should sell. I'm happy to provide any additional info on numbers or anything else.
This mortgage for our existing house is only under my wife's name. My income is about to jump from $60k to $700k while my wife will likely continue to make $200k in the new city. I think we could get a new house in the new city for $1.3mm with my income alone.
Putting that aside, if you are going to consider return on equity, you should compare that number to the return on equity for other investments, and in particular to other highly leveraged investments. (If you would not make other investments with 4:1 leverage, you should think carefully about why you are willing to do so here.)
I do think the low mortgage and property tax rates make it possible for this investment to be profitable. It would probably not be a good investment at prevailing mortgage rates and with the full property tax.
This is actually a warning sign that the appreciation may be disappointing, because another investor may not want to pay $500K for this house. They would have to pay an extra $5000/year in tax and an extra $11,000/year in mortgage interest compared to you, eating nearly all the profits. But you didn't use a crazy number for appreciation, so you're probably already aware of this.
Statistics: Posted by eigenperson — Sun Sep 28, 2025 3:42 pm — Replies 20 — Views 1197