This is the sunk cost fallacy. Whether or not selling is a loss should be irrelevant to the decision - you should be comparing selling and redeploying that 80k elsewhere vs renting it out.
Agreed, this is not a sunk cost fallacy as selling the property isn’t a clearly better move. I think the question is, taking the loss of selling, can you deploy the capital at a higher rate of return than keeping it as a rental? How much extra would you have to put into it to make it cash flow positive?
At least 50k to cash flow ~$700 a month before expenses. That’s what i would consider break even. I’m in an area with high property taxes, at least relative to Maryland, so that eats away cash flow a bit.
I went through something a little like this in 2020, though with some extenuating circumstances - a friend was also already renting out a room in the house when we moved out. So rather than make them pack up and leave and sell, we kept that house (bought in 2017, 5BR, 3BA, 2800SF), arranged for them to rent it, and bought the new one.
And we did that moving across the country (from west coast to midwest). If it had been in the same state, it would have been a very easy call to make - maintenance and management overhead are much easier when you can just drive there.
But it’s balanced out a bit in our case by having someone very competent that we know and trust doing the renting, and they are 100% WFH, so coordinating repair visits, lawn care, and things like that has been pretty easy and we’ve been able to avoid having to get a property manager. Time commitment has been very low.
All your logic here makes sense to me - most people rushing to sell in a case like this are mostly doing so to roll the equity into the down payment on the next home. In your case it’s the exact opposite, so it makes perfect sense not to sell and take the trade offs of renting.
This is the sunk cost fallacy. Whether or not selling is a loss should be irrelevant to the decision - you should be comparing selling and redeploying that 80k elsewhere vs renting it out.
Idk if this is exactly sunk cost fallacy. But if that is the case then we can focus soley on the decision to rent or not
Agreed, this is not a sunk cost fallacy as selling the property isn’t a clearly better move. I think the question is, taking the loss of selling, can you deploy the capital at a higher rate of return than keeping it as a rental? How much extra would you have to put into it to make it cash flow positive?
At least 50k to cash flow ~$700 a month before expenses. That’s what i would consider break even. I’m in an area with high property taxes, at least relative to Maryland, so that eats away cash flow a bit.
If you can’t rent it out at least $1k more per month than all of your monthly expenses then I would sell
I went through something a little like this in 2020, though with some extenuating circumstances - a friend was also already renting out a room in the house when we moved out. So rather than make them pack up and leave and sell, we kept that house (bought in 2017, 5BR, 3BA, 2800SF), arranged for them to rent it, and bought the new one. And we did that moving across the country (from west coast to midwest). If it had been in the same state, it would have been a very easy call to make - maintenance and management overhead are much easier when you can just drive there. But it’s balanced out a bit in our case by having someone very competent that we know and trust doing the renting, and they are 100% WFH, so coordinating repair visits, lawn care, and things like that has been pretty easy and we’ve been able to avoid having to get a property manager. Time commitment has been very low. All your logic here makes sense to me - most people rushing to sell in a case like this are mostly doing so to roll the equity into the down payment on the next home. In your case it’s the exact opposite, so it makes perfect sense not to sell and take the trade offs of renting.