Should I sale or rent - Houston

Question

Hey everyone,

We’ve grown out our current home and are under contract on a new more spacious home. My current home would rent for about 1900-2000, but my mortgage is 1850 a month (15 year loan @2.75). There wouldn’t be much cash flow if I rent but it’s a good house and i think with home pricing on the decline it may be best to hold onto it. If I sold I’d probably get 255k and owe 155k.

What do you guys think??

Travis Timmons · Answer

I'll second @Jacob St. Martin - what's the opportunity cost? If you had 100k cash, would you use that money to buy your current house as a rental? If the answer is no, then find a better and more profitable property to deploy that capital. If you won't buy anything with that cash, then, yeah, it is better to keep it as a rental than to let cash sit in your bank account.

You also have to take into account that we live in reality and there are real transaction and closing costs associated with selling a home. I'm not sure if you mean $100k walk away money or $100k in on paper equity.

You also have to take into account that we live in reality and there are real transaction and closing costs associated with selling a home. I'm not sure if you mean $100k walk away money or $100k in on paper equity.

Jacob St. Martin · Answer

I would say that it depends! Do you think that the area of houston that this house is in is likely to see consitent appreciation and rent growth? Are there any companies moving to the area and bringing jobs (and therefore tenants) to the area? If you think that there is strong growth potential in that market I would say keep it. Otherwise you could take the 100k from selling and use that as a down payment to get into a larger property that will generate more cashflow and appreciation than the current one. if you are using that 100k as a 20% down payment and want to stay in the area I would look and see if you can get into a duplex/triplex/quadplex with that money in your area.

Matthew Crivelli · Answer

If you can afford to move without selling, I would keep it and let a tenant pay the rest of the note off. @Joe Zarate

Nathan Gesner · Answer

You need to learn how to calculate cashflow and determine if the home would be a good rental: https://www.biggerpockets.com/...

If the property rents for $2,000 but your mortgage is $1850, that only leave $150 to cover maintenance, capex, vacancy, etc. On average, you can expect to spend 10% of the rent just on ordinary maintenance, which means you will be $50 in the negative each month. What if a tenant skips paying rent for a month? You'll have to come up with $1850 to cover the mortgage. What if the tenant fails to pay two months of rent, trashes the place, and gets kicked out? Then it sits vacant for a month while you do $6,000 in renovations?  $6,000 in rent and utilities plus $6,000 in renovations, and you're only making $150 a month? It would take 80 months to recover the losses!

Eliott Elias · Answer

Rent, build the wealth and collect the check 20 more times instead of one more time

Joe Zarate · Answer

@Allan C. I’d like to focus on growth for now. What would you do in this situation. Would you Parlay the $ I get from selling it into other cash flowing properties?

Allan C. · Answer

@Joe Zarate your issue is the 15 yr loan term. You are paying down principal quickly (obviously not a bad thing), but you sacrifice cash flow and yield. You also end up with a lot of equity tied up until you can cash-out refi or sell.

Is your strategy to grow your portfolio or have debt-free assets sooner?

Joe Zarate · Answer

@Matthew Crivelli  yea once I factored in the taxes without my homestead exemption I’d probably end up being out of pocket by $100 a month. Which I don’t think I’d want to do.

Joe Zarate · Answer

@Jacob St. Martin thanks for the info, I was leaning in that direction. Just needed some like minded folks opinion, so I can weigh the options.

Joe Zarate · Answer

@Travis Timmons yea I like the idea of having the cash for higher potential return. I think if it sold for that amount I’d have roughly 88k after agent fees and all that. I’m leaning towards selling it and using that money to hopefully get a duplex. What part of Houston are you in? I’m in the pearland area but the house we will be moving to is in Clear Lake area

Should I sale or rent - Houston

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