patrick.net

1. Depending on what you want to do with the the house long term, you should read this...https://www.investopedia.com/ask/answers/06/capitalgainhomesale.asp. It's important for capital gains.
2. Depending on your state, you may lose homestead exemptions and have a higher property tax rate later.
3. Always protest with a property tax protestor.
4. THIS IS VERY IMPORTANT...please tip me two cents for saving you thousands of dollars :)

Al_Sharpton_for_President says

Insurance: $1,200.

When I had rentals, I added an umbrella policy. They are not expensive and would be useful if a tenant gets injured and sues.

HeadSet says

Al_Sharpton_for_President says

Insurance: $1,200.

When I had rentals, I added an umbrella policy. They are not expensive and would be useful if a tenant gets injured and sues.

I do it on my primary home. I generally over insure. Travel insurance is another thing but not on topic. But if you get sick or injured in a foreign country you're likely fucked. So we always drop $150-200 additional on out of country/territory trips. 1 for trip cancellation and 2 for medical issues. We used it once for cancellation and it's paid for itself for a lifetime. $7k. Ended up rebooking cheaper as well.

Back to the OP. Have you lived in it recently? How many years? Remember 2 of the last 5 years if you lived there are cap gains free. Test it out as a rental and if you're not digging it you can sell and not pay taxes unless you had $500k+ appreciation from your purchase point. And most people don't know this, but if you kept good records, any improvements can offset this as well. So if you put $100k into the house it would technically be $600k, you just need documentation. Most people think it's only for investment properties, it works on primary residences as well.

If you're digging being a landlord, keep it. If you lived in it for 2 years and doesn't end up like you thought, sell it tax free. You're in a good place really. Just make sure to give yourself time if it's not working out to sell if you occupied it for two years. You have 5 total.

Personally I'd rent it for 2-3 years get the income and sell depending on tenants. It's possible to get a long term tenant, but if you're having to lease it every 2 years I'm not sure it's worth it, but that's an individual market thing.

Also in your net annual revenue you don't account for the income taxes or depreciation. They'll likely offset each other, but ultimately is $27k passive income worth it for you? Or just sell, hopefully tax free, and invest in less hassle type investments? Even if managed well, you're going to get calls and have to do shit. My gut would be to sell even with high interest rates. You'll likely get multiple offers if priced right. I don't know anything about Maryland markets, but given what's around the state I can't imagine inventory is high.

Not exactly sure what is the proper calculation. Try this one for starters as the 10 year Treasury is at 4.25%
$27,215/ 0.0425 = $640,000
Hopefully your home is worth less than that; otherwise, sell it.

EDIT: also, as Wookieman pointed out, don't forget depreciation. It's 1/27.5 * (value of home). This is an expense, that is recaptured at the time the home is sold, but provides for some sweet tax free yearly income.

1337irr says

4. THIS IS VERY IMPORTANT...please tip me two cents for saving you thousands of dollars :)

Thanks, 1337irr. Unfortunately my tip account is bare, but perhaps Patrick will allow unlimited coin printing. What could go wrong? Dead link, BTW, but I will investigate, nonetheless. We’ll be moving to a more tax friendly state. Maryland, while not New York or Joisey, is pretty bad.

WookieMan says

Back to the OP.

Thanks, WookieMan. We have lived in the house since 2017. Good point about is $27k in passive income being worth the hassle. Thanks for the cap gains info. I’ll bounce it off our tax guy.

EBGuy says

Not exactly sure what is the proper calculation. Try this one for starters as the 10 year Treasury is at 4.25%
$27,215/ 0.0425 = $640,000
Hopefully your home is worth less than that; otherwise, sell it.

EDIT: also, as Wookieman pointed out, don't forget depreciation. It's 1/27.5 * (value of home). This is an expense, that is recaptured at the time the home is sold, but provides for some sweet tax free yearly income.

Thanks, EBGuy. The home is worth more than $640,000. Good point about ROI.

Out of curiosity, why keep it if you're really leaving Maryland?
I'd probably have a heart a tack ack ack writing a $9000 property tax check for a place where I no longer lived.
"Thank you for paying the salaries and pensions of the county workers, firemen and sheriff deputies in your county."

Anecdote about Maryland:
My father told me he used to ride around with an uncle who owned an "apartment building" somewhere, probably Baltimore.
It was former slave quarters, inhabited by former slaves; however they paid rent after they were freed.
How times change; every April 15 I send in money so they pay just 10% of rent to live in Sec. 8 housing in Baltimore.

clambo says

Out of curiosity, why keep it if you're really leaving Maryland?

Good question. The previous home we owned is now worth $1.5 million, almost twice what we sold for in 2016. So capital appreciation is a reason, and that is not factored into the maths in the OP.

Make sure to really vet your property manager. We were ready to rent two places out here, and the managers never sent us the lease. We moved on, and in both instances, they dropped the rent before finding someone. You think they ever told the owners? Also, make sure the company knows how to value good renters. We're worth more than gold, and not all agencies understand that fact.

My inner jerk suspects the wife had something to say about keeping the house.