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Ask Dave

Should the Rental Be Sold?

Rob owns a townhome that is a rental property. He and his wife think they can sell it and make about $110,000 profit, then pay on their main residence. What does Dave think?

QUESTION: Rob in Colorado owns a townhome that is a rental property. He bought it before getting married and is between tenants right now. He and his wife think they can sell it and make about $110,000 profit, then pay on their main residence. What does Dave think? Dave has an idea that can give a good outcome if the house sells or not.

ANSWER: Even with taxes, you’d still have more than enough to pay off the house. I would fix up the property and get it ready to rent or sell. Put it on the market for sale and, if you get some nibbles, fine. If you don’t in a month or two, put it back on the rentals. There is nothing driving this except being debt-free on the house. I love the idea of being debt-free on the house, and I would sell the townhome. But I wouldn’t give it away.

You are in a weird real estate market. What’s weird about this real estate market right now is that there are basically two players out there trying to sell stuff: those that are desperate and those that don’t give a rip. There isn’t the medium-grade level of intensity seller out there. There is the desperate seller whom you don’t want to compete with, and then there is you, who is someone with a property that you can basically put out there as a fleece, and if God wants you to sell it, then fine. He sells it, then you take the money and get out of debt. But if it doesn’t, then you put a renter back into it.

You don’t want to sell it for $20,000 under asking price, because you’re not a desperate seller. Talk to a good realtor, and you might investigate how stuff is doing in that particular neighborhood. You don’t have a lot of competition, which should say that the realtor should be able to give you some numbers about the DOM, or days on the market, that something sits in that neighborhood before it sells. You ought to get a good indication on that.

It sounds like stuff would move in 30 or 60 days there. In other parts of the country, it might be a year. You don’t want to sit on something for a year; you’re better off just to rent it. If this market is exclusive enough and there’s enough supply and demand there and you’re not competing against many people and the thing will move fairly quickly, all of that portends well toward a good selling price for you. Assuming all that, I’ll get out of there in a couple of months and pay off my house.

Just don’t give it away and don’t get in a hurry. Don’t get all emotionally twisted up about it and do something silly, but give yourself two or three months to turn the thing and then after that, put a renter back into it. Also, do a better job screening tenants so you don’t have to put up with the garbage that you did last time.