Episode summary
What do you do when your rental gets broken into, won’t sell, and you’re stuck between cashing out or doubling down? Midterm Rental, Longterm Rental, Sell the Property?
In this episode of The Roots Podcast, Max Moore puts co-host Tyler Lingle on the “real estate therapy couch” to break down a real Indianapolis rental dilemma:Sell at a number you don’t love? Long-term rent again? Try midterm furnished? Or pivot completely?
This is a masterclass in return on equity, seasonality, lease strategy, and why “right idea, wrong month” can cost you thousands.
Full transcript
Auto-generated from the episode audio. May contain minor errors.
We got an interesting write in on the episode. It's not an email. It's actually my co-host Tyler Lingal to the Roots podcast. Tyler, I hear that you're struggling with your rental and you need to come to the uh real estate doctor and sit on my couch a little bit for some therapy. So, tell me about your long-term rental that you are are teetering on. Do I sell it? Midterm, long-term rent it? How is it performing? What's the property? Fill me in. Bought it in 2023. did a renovation, refinanced it, that was all fine and dandy. Rented it out for $1,500. Lease went up in August. Okay. I had a lot of equity. Decided to sell it. Okay. Had it on the market for $200. Crickets Christmas happened, gets break broken into uh not selling, reducing price, no showings. I am now deciding, do I long-term rent it? Do I medium-term? Do I put furniture in it and try to up the rent rate? Or do I just reduce the price and sell it for what feels like a number I don't want to get? Did you have debt on the property? Yes, it has a mortgage just over 100,000. Pretty low mortgage. What's the monthly? It's like 650 something right now. It's pretty low. So you were just going to sell it to basically trade up or fund your lifestyle unlock trade up. Yeah, trade up. Trade up. Okay. Yeah. So 650 a month you Wow. You were basically we'll put maintenance expenses and all the fun things. Property manager in there. You're probably cash flowing like 500 a month in the long-term rental. Came up in August, put it on the market to sell. We get broken into and now you're kind of like, oh, do I keep on trying to sell it? What was the renovation? cuz you did do a renovation after the moved out. We put in what was it like $7,500 or $10,000 worth of paint, some flooring in the kitchen. It looked really nice. Not wallpaper. Yeah. Yeah. Like textured wallpaper. Yeah. So, we cosmetic. Did some cosmetic stuff. It felt very Irvington when it was done. Yeah. So, I feel like knowing that So, you've put the 10K in. You were cash flowing essentially six grand a year over the last two years. So call that 12 grand. All your cash flow has gone to the Renault. Uh what did you have it listed at? 199. So 199. So the equity was essentially 90k essentially because you're a broker and you can do broker things and not pay commission to yourself because why would you rob Peter to pay Paul? Um awesome. Can it rent for 1,500 again? Yes. Is it on the market for rental now? Yes. Okay. So, we've decided to go on ahead and pull it off the market for 190 and put it on for rent for 1,500. I was last on the market for 195. Okay. And no bites. Couple showings. Really slow. Right. People were celebrating Christmas and being with their families and ringing in the new year. What how much would it cost to furnish? Have you gotten quotes from our good buddy Trace? Uh, I would say it cost around five 5K. Trace, can you confirm? Producer Trace does furnishings for anybody looking for paying for labor too would maybe make it do 5K. Yeah. Okay. 5 to 7K. I wouldn't do it myself on this one. Right. So cost seven. 7K. Trace is making money. Got it. Perfect. Okay. 7K. What would it rip for? Is this an MTR? That is the question. I'm going to say very very conservatively 2,000. 2K. I think 2,00 is actually pretty pretty good. I think it could do 2K. I agree. Uh knowing the area, knowing the finishes that you just did, that it looks really good. We'll obviously be popping up some pictures for that. Dude, the $500 difference literally tells me in one year you can pay back your furnishing costs by utilities. This year they were paying utilities. They were paying utilities. So, I don't know, maybe that's 200 a month, 250 a month in the winter. That's what stopped me. It's like, man, it's only 250 extra. What's the point of MTR? Cuz they were paying utilities. So, in 15 months, you'll get your furnishing back having a rental that is rented for two grand a month. Do you believe that you could get 200k on sale because somebody would buy the cash flowing asset as the question? Sorry. as opposed to just selling it to a first-time Irvington home buyer. Do you believe that some an investor would purchase right now? No. Maybe if rates keep going down. If rates keep coming down. So 2K. I'm just saying like you hold it for the next 15 months as a furnish rental. Do you feel you could sell it? I'm not 100% confident on that one. For 200k. Not 100% confident. No. Just with the way furnish rentals seem to be selling, it's not convincing me that it would sell. Right. Because what happens when that tenant moves out for the three months and they start questioning those things? I don't disagree with you. What would it do on Airbnb? Not the right street. No, Emerson's a little busy, but it's the good part of Emerson. I don't know. I think it's similar to MTR. Okay. But less stability. Similar to MTR. You probably end up bringing like 2,800 a month if I had to guess. But people, they're going to break and it's going to be a little bit more expensive. Okay. To me, anytime that you can pay your furnishings back under 18 months, it makes a lot of sense because you're gonna get the depreciating value to a sense you'll you can rent it out for a month. Somebody has to stay there one night and pay you rent and you can do a cost seg study. Mhm. You're going to save on taxes. That's not like you actually are going to save more on taxes having the person break in and cause the 10k in damages as opposed to the but for the general public they would my issue was the liability of all the furniture and extra cost if I'm only going to sell it later you know and that's where I'm like I don't even know if I want to sell it later. I'm like where am I going in general with this asset? Yeah. Let's go the the other way. So, we know that MTR is 15 months to pay the furnishings back. Can that 1,500 go up because it got a renovation. It got a refresh. It's getting applications and I'm calling my property manager like, "Hey, at 1500 at 1500 it got two applications and it's been up for weeks." Like pretty fast. Do you think somebody would sign a 24-month lease at 1500? When we've asked before, it wasn't likely, but maybe. Okay. Okay. The right person could do that. If you gave them one month free, do you think that they wouldn't do it? That would help. Yeah. I feel like if you can get this rented back for 24 months, you're going to cash flow the damages. Mhm. The property was like you like why why break what was already work working, right? Like don't we don't need to fix something that was already working. Mhm. What you try to do by selling it to trade up right idea, wrong month, even if you could go 18 months and let's get this thing to where you can put it on the market in the summer of 2027. Mhm. And sell it for 210ish because it's the summer and everybody's excited. Um to me that makes a lot of sense. It makes more sense. This makes me the most excited, right? And it makes more sense over the MTR because you are not having to pay the tenant turnovers. You aren't having the liability of the furnishings, right? Yeah, I get it. I think if this was like a different property and maybe a better location, I think MTR would slay. Yeah. I'm not convinced they'll love the busy street, the guests and stuff out of all their options. I just love that you only have to pay $600 a month to keep it. Oh, yeah. And in your situation, it does the return on equity does not seem greater than the cash flow potential, right? You could just go like, why not just pay off the rest of the 100k and just get like a heliloc on it? I could get a helilic on it now with that equity, right? And just unlock it and go and buy another Emerson next door. I agree. Rent it out as soon as possible. Seems to be the move for as long as lease as possible. Awesome. Well, this has been another episode of the Rest Numbers Show. Thanks for coming in and sitting on my therapy couch. Glad I could solve your problems.
Episode questions, answered
Quick answers from this guide.
Should I sell my rental property in winter or wait until summer?
Tyler listed his Irvington property in winter and got almost no showings, partly because buyers were focused on the holidays. Max suggested waiting until summer 2027 when buyer excitement is higher and aiming for a sale price around $210k instead of settling for less in a slow season.
How do I decide between a midterm rental and a long-term rental?
The hosts compared a $1,500 long-term rent against a $2,000 midterm furnished rent. The $500 monthly difference means furnishing costs of around $7,000 are recovered in roughly 15 months on the midterm side, but long-term avoids tenant turnover costs, furnishing liability, and utility expenses that offset some of that gap.
How much does it cost to furnish a midterm rental in Indianapolis?
Based on their discussion, furnishing a property like Tyler's would run approximately $5,000 to $7,000 including labor. They referenced working with a contact named Trace who handles furnishings professionally rather than doing it yourself.
What is return on equity and why does it matter for rental property decisions?
Return on equity compares the cash flow you earn against the equity you have locked in the property. Max pointed out that if the cash flow potential is strong relative to the equity, it may make more sense to keep renting than to sell, especially when sale prices are soft.
Can I use a HELOC to unlock equity without selling my rental property?
Max suggested Tyler could pull a HELOC against the roughly $90,000 in equity he had built up instead of selling. That would free up capital to buy another property while keeping the existing rental generating cash flow.
Is Airbnb a good option for a rental on a busy street?
Tyler and Max agreed that the property's location on a busier street made short-term Airbnb less appealing than a midterm rental. They estimated Airbnb could bring in around $2,800 a month but noted higher turnover costs and more wear on the property.
How can I get a tenant to sign a longer lease on my rental?
Max suggested offering one month free as an incentive to get a tenant to commit to a 24-month lease at $1,500. A longer lease would let Tyler cash flow through the repair costs from the break-in without having to change his rental strategy.
What tax benefits come with furnishing a rental property?
Max mentioned that once a property is furnished and rented, even for a single night, it qualifies for a cost segregation study. This can accelerate depreciation deductions and reduce the owner's tax liability compared to a standard long-term rental.