Sell or find new renters Spring Branch (north of I-10) (Houston: for sale, 2013)

[Oskar_Z28]

I have this house that I could probably sell for $300K + in Spring Branch. I had renters there for last 3 years, but they just moved out. I was getting $2K / mo, which seemed to be average going rate for similar properties, but fairly low for something that I could sell for $300k. House is in great shape btw. With taxes going up, insurance is already fairly high, and the value for the property being fairly high, does it make sense to keep it and keep renters in? I could take that money and payy of my current mortgage instead and not to have to pay $10k/yr in interest. Or I could buy some other rental property.

[cheryjohns]

Rule of thumb for rent is 1% or a little more of current value. Sell it for $300K. Buy something else for $200K - rent for same $2000 - take the difference of the old rent house and the new rent house sales price and apply towards your current house. Recast the current house loan.

[marksmu]

Originally Posted by cheryjohns

Rule of thumb for rent is 1% or a little more of current value. Sell it for $300K. Buy something else for $200K - rent for same $2000 - take the difference of the old rent house and the new rent house sales price and apply towards your current house. Recast the current house loan.

Do you think that formula holds true for upper end areas like the Heights, West U, Memorial, etc? I look at those homes all the time, and have a few rentals there and I get nowhere near 1% value...I look for a Cap Rate of about 3-6% and then bank some appreciation every year.

In this market where housing prices have been steadily rising, it seems nearly impossible to keep up with 1% of investment value.

[hendersj31]

No it doesn't. Like you I have several and if I charged 1 percent for rent they would be vacant.

Originally Posted by marksmu

Do you think that formula holds true for upper end areas like the Heights, West U, Memorial, etc? .

[gwarnecke]

Rental rates are more influenced by the quality of the house itself than sale prices are, especially in this relatively-soft rental market where tenants have lots of choices. For an older home in areas with fast-rising land values, it's very difficult to get 1%.

My wife and I have considered buying an older home in Spring Branch (or, ideally, Spring Valley Village) that we could rent out for awhile and eventually tear down (and build a home for ourselves on the lot). It's very difficult to make the numbers work - you'd be lucky to get $1500-2000 a month for a $500k teardown. The property itself will hopefully continue to appreciate, but until you sell it's just an unrealized gain that you're paying taxes on (and if you don't have a homestead exemption, your tax increases aren't capped).

[detachable arm]

Originally Posted by Oskar_Z28

I have this house that I could probably sell for $300K + in Spring Branch. I had renters there for last 3 years, but they just moved out. I was getting $2K / mo, which seemed to be average going rate for similar properties, but fairly low for something that I could sell for $300k. House is in great shape btw. With taxes going up, insurance is already fairly high, and the value for the property being fairly high, does it make sense to keep it and keep renters in? I could take that money and payy of my current mortgage instead and not to have to pay $10k/yr in interest. Or I could buy some other rental property.

Keep renting it, until people forget that some kind of nasty industry is buried in between those neighborhoods. Due to that recent chemical inferno, I'd say you just lost 10%.

[Failed Engineer]

If you suspect you will have trouble finding a tenant quickly, sell it.

If I were you, I'd list it for sale and as a rental and take whatever happens first.

Your dirt is valuable so all things being equal, I'd prefer the renter. The $2k also seems a little low. Can you do some modest cleanup and sprucing up the place so you can get a couple more hundred a month?

[cheryjohns]

Originally Posted by marksmu

Do you think that formula holds true for upper end areas like the Heights, West U, Memorial, etc? I look at those homes all the time, and have a few rentals there and I get nowhere near 1% value...I look for a Cap Rate of about 3-6% and then bank some appreciation every year.

In this market where housing prices have been steadily rising, it seems nearly impossible to keep up with 1% of investment value.

No, it doesn't - but then the investors I know don't buy in those neighborhoods. In the higher end, renters are more or less "placeholders" as the property value keeps rising. That's a whole different investment strategy.

[Oskar_Z28]

Originally Posted by detachable arm

Keep renting it, until people forget that some kind of nasty industry is buried in between those neighborhoods. Due to that recent chemical inferno, I'd say you just lost 10%.

This can be said for anywhere in Houston....

[Oskar_Z28]

Originally Posted by gwarnecke

Rental rates are more influenced by the quality of the house itself than sale prices are, especially in this relatively-soft rental market where tenants have lots of choices. For an older home in areas with fast-rising land values, it's very difficult to get 1%.

My wife and I have considered buying an older home in Spring Branch (or, ideally, Spring Valley Village) that we could rent out for awhile and eventually tear down (and build a home for ourselves on the lot). It's very difficult to make the numbers work - you'd be lucky to get $1500-2000 a month for a $500k teardown. The property itself will hopefully continue to appreciate, but until you sell it's just an unrealized gain that you're paying taxes on (and if you don't have a homestead exemption, your tax increases aren't capped).

This is where we are. When I lived there, the value of the house was ~120,000 per HCAD. Now it's doubled + no homestead exemptions, so taxes are going up. I don't mind renting property out because it's nice to have that income, but with taxes, insurance, maintenance on an older house, I am not happy with the return. I may sell this one and get something else - the house itself is not a teardown is still in really good shape (had really good renters there in last 3 years) and partially remodeled from 2007-2013.