Should try to sell or rent my townhome?

Asked by Stacey Gunderson , Des Moines, IA Fri May 25, 2012

I own a townhouse in Anoka county, free and clear, in a nice neighborhood. My circumstances have suddenly changed, and I need to move out of state soon. I thought about renting my place, since rentals are allowed, and looked into this. Well, the city requires that I take a class (9 hours), get another home inspection, and a criminal check on ME (all at my expense) before I can get a rental license. This seems like a lot of hoops to jump through, so I was also considering selling. But I don't want it to sit on the market forever either, a little while is understandable. I'm willing to sell on contract or other more creative means as well. Has the market improved much? I'm going to be out of state, so selling probably makes the most sense.

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Christopher…, Agent, Bloomington, MN
Sat May 26, 2012
1) It would be worthless to rent your TH out right now. I don't know if Susan read the fact you own the TH Free & Clear right now? No you don't need to do a short sale haha! Yea rents are good right now but you still are going to have a CAP rate probably around the 10-12%.

6-10%?? O god that is making me cringe right now thinking about that. You should be able to get much more of a return on other investments then this. Heck I could get you 12-18% right now with zero work that is a billion times more effective in passive investing than a rental. Doing a lease/option even would be a better option, but at least with a land contract you have much less hassle to deal with. I think you would enjoy a land contract if you did not have something immediate to invest your cash in. However, like I said I have some options I would discuss with you if that is something you are interested in.

2) Why the heck do you need a property management company? This is a TH association with HOA dues that takes care of everything you need. I would suggest working with a leasing company IF you were to do a rental. They can screen a tenant and save you quite a bit of time for the money. I like Renters Where-house, but there are some others.

3) The market has not improved very much with TH's. To me your best options are either sell outright and put your cash into a better investment, or do seller financing. If I am understanding what you are saying Renting does not fit your needs, and I can talk a lot about this if you want. I 100% agree with you.

I am more than willing to talk to you about the market, do an analysis for you, and give you my professional reccomendation on what is the best course for you to take. Anoka County is my backyard and I know it very well. I work with investors in this area so I know quite a bit more than the average realtor.

Hope to speak with you soon!

1 vote
Mark Claesse…, Agent, Coon Rapids, MN
Sat May 26, 2012
Dear Omaha Sunshine.....

I have great news for you, my friend. Since I can read between the lines and have a lot of experience with clients in your exact situation, let me jump in.

Based on your research, you obviously live in my city of Coon Rapids. And yes, you are correct that they have made it very difficult for a homeowner to become a landlord and lease this out to a tenant. In fact, every single investment property client of mine has chosen to sell any properties in Coon Rapids and will only purchase in other cities in Anokay County (i.e. Anoka, Ramsey, Andover and even St. Francis). And they fair much, MUCH better out there than they do in CR.

That said, I can stil tell you that you could jump through the hoops you discovered and still do okay. As opposed to one suggestion from my colleague, I would definitely hire a property manager to check on your property and take care of issues while you are gone. It is a 100% right off, and when combined with your ability to deduct your property tax, your maintenance fees, and even your depreciation.....combined with (yes, for the first time in 4-5 years) would have a huge money producing investment yielding FAR more than what you could get with any other investment. However, you will be lacking one thing and that is leverage. That will take a complete different discussion between us later.

Now, if you are moving for work and need to purchase another home, then you have a couple questions to answer. First, do you need to sell this house first in order to get approved for another loan? Second, if you DON'T and you could still qualify for another one, will that approval give you the house you need in Omaha? Well, i have a relocation client right now moving HERE from Omaha and I have a few thoughts about that market vs. ours. Ours is much healthier. me for more details.

But you asked a great question about selling here. You should have no worries. In the past couple weeks I listed two homes in Coon Rapids. Both were in nice shape and they were average value. Now, I am NOT bragging, although I excel at what I do, I am simply going to illustrate exactly where the market is for you. I listed them both on a Friday afternoon. In both cases I had 30 showings.......3+ the end of Sunday. Yes, we picked the highest and best offer, of course, and that was it. And in both cases we got asking price or over with almost no issues to deal with. This is our market right now. I can sell your home in 2- 3 days to the highest bidder and it can probably close in 3-4 weeks.

Your own prediction was that "selling probably makes the most sense". And in this case, I would agree with you, even though I do not understand the full story.

Yes, the market has improved in a HUGE WAY. Last month, in April, our average sales price went up 12%. That is the highest since 2004 or 2005. Yes, we are excited.

Feel free to call me next week to talk about more details,

0 votes
That is what I figured you are talking about TH's in both Blaine & Coon Rapids that were going for $175,000-$185,000 in 2005 now hovering around $135,000. Yes, the market is improving but these two cities are in my backyard and I am not seeing substantial price increases yet. If you still would like me to preform a CMA on the property and talk about investment options I would love to hear from you. It sounds like a real possibility you might just hold (which is not that bad of an idea either), but at least after speaking with me you will know all of your options more clearly.

~Knowledge is power~
Flag Sun May 27, 2012
You're right, I am in Coon Rapids. And yes, they do make it difficult for owners to rent out their properties. I didn't expect that. I noticed that there's currently another townhouse in this complex on the market now, and its listed for less than what I paid. Judging by the photos of it, it looks comparable, so that's discouraging. No, I am not going to buy another place right now. Doing a rent to own sell requires the same hoops as renting. Thanks for all the great answers!
Flag Sat May 26, 2012
Elizabeth Fu…, Agent, Wayzata, MN
Sat May 26, 2012
I understood Sunshine to say tthat the property is free and clear; I would say that, while it is a little costly and time consuming, renting could give you an income and you could also consider a rent-to-own which could be a good way to have the best of both worlds. I just did this for one of my clients who bought a new town home and kept her former one as a rental. Although cost is a factor at the outset, it could be a good way for you to let the market come up a bit. If you are interested in discussing the benefits of renting vs selling, rent-to-own, please feel free to call me. I have a lot of experience personally, because I currently have three of these rent to own units, and have set up many of these for otherss, including one just this week! Liz, 612-986-4105
0 votes
Susan Hoffla…, Agent, Shoreview, MN
Sat May 26, 2012
Hi, Omaha_sunshine!
You are at a sweet spot right now. The real estate market is improving for sellers and it's still great for people trying to find renters. Thing is, I don't know what you owe on your property and if it's more than what you could receive if you sell.

The good news about that is a job move that's more than 50 miles from your current location is considered a valid reason to allow a short sale. I would talk to an agent about doing s short sale. That might be your best bet if you owe more than the house is worth right now.

Good luck~
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0 votes
Susan is usually pretty good Debbie so no worries. over 90% of TH's in Blaine & Coon Rapids are underwater due to these cities being crushed in the recession. I am just now finally starting to see some traditional sellers on the market but they are still taking a big loss. Nonetheless, we as always us Realtors should try to give as accurate information as possible.
Flag Sun May 27, 2012
HI - just as a friendly suggestion - you might want to consider deleting your "advice" here , especially since Christopher Block pointed out that you didn't pay attention to the fact that the poster owns his townhome FREE and CLEAR - no mortgage to pay off - no short sale needed, or even possible!! your haste to answer, you probably missed that very important piece of information.
Flag Sat May 26, 2012
Bill Wallace, Agent, Bloomington, MN
Sat May 26, 2012

Here's an answer without trying to sell you on something -

I have 6 rental townhouses myself. They rent quickly and rents are rising right now so it's a good time to be a renter. If you are going to rent it out you will want to hire a property management company since you will be out of town. I'd check with the city to see if you still need all the background stuff if you are using a property management company.

To me the essence of your question should have more to do with the money involved. Do you need the money now for another home purchase? If not, then the primary question is whether the return on renting is better than the return on an alternative investment.

When I'm buying townhouses I calculate my expected rent (look on Craigslist) less 5% vacancy allowance. Then my expected expenses (taxes, HOA, maintenance (I use 1 mo rent), property mgmt). You then can find out your monthly expected cash flow and compare the annual expected cash against the current fair market value to get an annual return. I typically find a pure cash return of somewhere in the 6-10% range. Use that to consider your alternatives.

Hope that helps.

Bill Wallace
RE/MAX Results - Wayzata
0 votes
Mike Kelcher, Agent, Burnesville, MN
Fri May 25, 2012
I'm looking to acquire rental property in Anoka County. 763-228-2967 Mike
0 votes
Mike, are you looking for a great property manager? We will do a great job for you!! Chris Mauzy 612-367-7848
Flag Fri May 25, 2012
Mauzy Proper…, Agent, Lakeville, MN
Fri May 25, 2012
Good Question, and I have two different types of answers for you-
1- I own a company called MN Rent Solutions, we are property leasing and property management experts. We would love to rent your home and manage the property for you. We would handle the rental licensing so you need not jump through the hoops. We are averaging about 21 days to get a lease signed since the rental market is very good right now. We will handle the entire rental process for you and we even wire transfer the rent to your checking account. Literally turn key and no stress for you.

2- I am also a real estate investor and I personally own 20+ rental properties. I have been buying homes where the owners will sell on Contract for Deed. I would be interested in looking at your property if you decide to sell.

So, whichever way you decide to go, I think we should chat more- Chris Mauzy (612) 367-7848
0 votes
Joel Friday, Agent, Coon Rapids, MN
Fri May 25, 2012
Your home would sell quickly now if priced right. Renting is always tougher the further you are from the rental. Give me a call if you would like a current market analysis. I will do this for free and am located in Coon Rapids. We are seeing multiple offers on a lot of homes in the area right now.
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Paulette Car…, Agent, Coon Rapids, MN
Fri May 25, 2012
Good Evening,

The market is improving - with home sales raising considerably last month. A contract for deed would allow you to most likely get more for your town home as the buyer would be willing to pay a bit more for your to finance the transaction and you will be able to avoid an appraisal on your property. Rentals are also an option to selling, but since you would be out of state you would most likely want a reputable company to manage the rental property.

To help you make your decision, I would definitely get a Comparative Market Analysis on your town home, then I would interview a few realtors to assist you in your decision making process. As one of the top realtors in the Twin Cities, and office out of Anoka County, I would love to help you out. Please contact me at 763.443.3733 or


I look forward to hearing from you soon!

Paulette Carroll
0 votes
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