Keep my first house and rent it out or sell it?

[Sherri Morrison]

Thanks to anyone reading this! It's my first post, and am learning more everyday about real estate.

We purchased the 1963 bungalow house (in Ontario, Canada) in 2010 for $155,000. It's probably worth around $275,000 if we sold today. And over the years we've put about $25,000 into it - although it would still need more to get it rent-ready (at least $5,000). The remaining mortgage is $80,000, and we're looking to buy a new house to live in for less than $350,000.

So - since the value has increased so much, would it make sense to sell it?

If we refinanced the house at $230,00, monthly payments + taxes would be $1379. Plus we would still need to factor in maintenance.

Houses in the area generally rent for $1500-$1800

Does refinancing at $230k to refinance make sense? Does that sound like something that's possible, or would it be more like $165,00 if they only let you refinance up to 60%? I choose $230 because it seemed like the number that would allow us to rent it out, plus give us a good downpayment on a new home. However, if the real value of $275,000 was used, I don't believe that the rent would cover the expenses - so it makes me wonder if it would make more sense to sell it.

Please share any guidance or advice, I'd greatly appreciate it!

Sherri

[Huong Luu]

Hi. Great question and great situation to be in. I would suggest keeping the property and renting it out, only if you can cash flow it. There are other things you can do with your money that will give you a return (and without the headaches of being a landlord). I hear what Roy is saying about the appreciation, but you can't count on that. Being close to Sarnia, the appreciation growth has been good. Also keep in mind, most lenders will give you 80% LTV of their appraised value. Regardless of what you can sell it for in the market or what another appraiser says or what your RE agent says, the lender will use their own appraisers.

Have you considered staying in this house, refinancing with a HELOC and then using the HELOC to buy an investment property? This way, your investment property would be a full tax write-off (including the land transfer tax(es), along with the HELOC interest. Also, this would probably allow you to access more funds to buy a multiplex.

Good luck