Sell primary residence or Keep as Rental

[Dee Ambler]

Sell or rent, that’s the question.

We have a single family home in a small town outside of Charleston, SC that we bought a year ago.

The house is not a great rental. It is very big. 6 bedrooms, 3400 sq ft and 3 stories. It has a very nice private lot. It is a new build, one year old. The lot back up to a very. large pond behind it, and a forest. There will never be homes built behind this lot since the power company has an easement for lines behind the trees.

We have to move out of state due to my husband’s work. We're trying to decide if we should rent or sell.

If we sell, we are looking to get most of our money back that we put in (down payment, small updates like paint and appliance purchases). We would net $94k which is about what we put in.

If we rent then our property taxes go up substantially and our total monthly cost jumps from $2900 to $3300 (PITA). I have looked around and I don’t think we can rent the house for more than $3200, maybe $3500 at best, this area goes for ~$1.04-115/sqft for rentals. This means we won’t be building any buffer for maintenance, none for occupancy, etc and we would have to build that buffer out of pocket.

We do have a lower interest rate so we would also keep that vs if we sell and buy another investment property, the interest rate would be higher. Our current interest rate is 4.875%. We put 10% down on the load in 2022, and our PMI is ~$68/month.

However we expect the house’s value to go up significantly in the next two years when they start building the commercial lots and open the big community club house. They are building a Publix in 2025. Lennar is expected to build another 10,000 homes in this area, highways are eventually supposed to connect to each other with new roads developed through this community. Also they are building SC's largest pool club down the street.

We expect it may negatively cash flow a little bit, or break even at best for the next 1 - 2 years, but the equity over the next 5 - 7 years is expected to do well.

Additionally, my husband pays a large amount of taxes currently. We're going to talk with a tax planner too, but we're thinking the loss on the property may offset the taxes he pays on his W2 so it may be a wash.

We're not afraid to be landlords. We own one property in Southern California that cash flows. We're still figuring out what to do with this SC property.

What would be the best decision here, sell and buy something else for investment or rent this out and wait for equity to go up?

Any thoughts, or opinions would be helpful!

Thank you!

[Mark Cruse]

Everything considered, if I were confident in that appreciation Id keep it. Break even may be ok  if I think the situation  will change in near future, but I´m not a proponent of being under water. So in essence, if I´m break even or maybe minimal cash flow i´d rent and monitor it. Id assess the situation in a year  with my exit strategy in mind. In the multis I have now I do enhancements after each tenant leaves to push the value because one day I will sell.