I haven't posted in awhile, but I'm still a landlord. We are trying to make a decision about a house we live in and own outright. We renovated when we moved in. We did not renovate with renting in mind. High end flooring instead of vinyl tile.

We followed our kids to West Michigan during COVID and formed a family pod with the kids and grandkids. We now have a condo in Sarasota and like to spend time there. To have a whole house we use six months of the year doesn't make sense. We could find a cheap condo or rent an apartment.

This real estate agent, not mine, said his investors have a formula: If they can make more selling a house, than they can renting it (gross) for ten years, they sell. Is this some B.S.? As my son said, you can make money once selling a house or over and over again renting.

For this house in a seller's market we'd gross around $450K and sell with a flat rate MLS. Renting would be just under $3,000K. We have to consider costs of a new roof, landscaping, etc.

We have another house in town that we could rent all day long for $3,000 with a waitlist. That's a simpler house, town water and sewer. I've considered selling this house and buying a better "rental."

What say you, wise people?

We are now retired (74 and 81) and find our standard of living has changed. Have you seen Schitt's Creek? My husband said, we are just like them, only we own the motel!

Thanks.

This sentence is the key to the best answer:

We followed our kids to West Michigan during COVID and formed a family pod with the kids and grandkids.

My husband would like to live in FL full time. In order to stay married, he as agreed to 6 months/6 months. I fly up once a month in the winter to hang with the kids. One grandchild is four, and I don't want to miss time with her. The boys are 8 and 11, and are less involved with grandparents except when we take them to the trampoline park!

$450K profit will keep you under the exclusion of up to $500K in profits for spouses filing jointly on a primary residence, whereas rent income will be taxed as regular income. There's something to be said for "a bird in the hand...." compared to who knows what might happen over the next 10+ years?

I don't mean to be morbid, but none of us are guaranteed the next decade. Also, we don't know how Govt regulations will increase on rentals, but my guess is they WILL increase.

I'd sell them all. Prices are high, insurance is going up a lot in Florida, some states are passing more and more restrictions against landlords.

I make zero decisions based on any of my 5- Grandkids.

Interesting formula. I had not heard of that before. I HAVE heard of the 2% rule, which states that if you can purchase a property where the monthly rent is 2% of the purchase price, it's a good deal.

If I do my math right, that means that:

If monthly rent is 2% or more than the purchase price, it's time to buy.

If monthly rent is 0.8% or less than purchase price, it's time to sell.

That's terrific you have your memories. My MIL relocated 800+ miles to be with us as our kids grew up. That was almost 15 years ago-- which means that she's now 15 years older herself. The first part of her plan was to be involved with the grandkids, but eventually, we'll be there to help her when she's no longer able to be as independent as she has been.

You sound like you're still in great health, and you have the added benefit of having a spouse. But keep in mind that someday, you may need to tap into that resource as a support system.

Don't rent a house with high-end finishes, especially if it's of any significant size. That's what's generally referred to as "overimproved." All it would take is one person who looks great on paper but is terrible in reality, and they could easily do five figures' worth of damage. Being a long-distance landlord is a bad idea, and it will be easy to lose control fast.

Sell!

$3k/month rent on a $450k house is an 8% return before taxes, insurance, repairs, vacancy, management fees, major maintenance, etc.

After expenses, you will be lucky to get a 4% return. If you assume a 3% appreciation on the real estate, that would give you a 7% return.

And you still have the liability of being a long distance landlord.

The future of land-lording will be challenging with more states implementing rent control, more protected classes, bans on evictions, additional legal aid funding, liberal judges and legislatures, etc.

Sell!

You can sell and pocket the money.

Use the proceeds from the sale to create a trust fund for the grandkids that is invested in good growth stock mutual funds. That money could grow enough to pay college tuitions at state universities and provide a nice down payment for the grandkids’ first house.

That would be a nice legacy from the grandparents. That might start a nice family tradition of grandparent trust funds for future generations.

If you want to stay a landlord with this property: don't. Instead;

Phil,

What about if they lived in it at least two of the last five years?

No homestead exemption but no capital gains either.

My area they are doing away with the homestead as such so that might be a wash as well.

Where I absolutely agree with MMIT numbers, the real decision point for me is that you over improved the place to let it be a rental. Allowing a renter into your home isn't going to increase the value of your IMPROVED asset.