Moving. Should I rent or sell my current home?

[Jon C.]

Hello,

I really enjoy this website and the insight everyone gives. I was hoping that y'all would have an opinion on our situation.

We are moving to another state in August and just closed on our new home. Our current home in Central Florida was purchased for $265K in 2009 and market values somewhere around $380K right now. We own the home outright with no mortgage. We had enough funds (and other investments) for the 20% downpayment on a $395K house we just purchased in another state. We have no other debt.

Couple options I'm thinking about:

1. I think I could rent this home for $2,500/MO, and after running it through the pro forma, I could clear $1,410/MO, including management fees. I've always wanted to start real estate investing anyway, and this could be a nice first step. We have about $300K total in this home, but the return doesn't look great at 5.6%. The home, however, is in a great neighborhood and area and should continue to appreciate in value.

2. I could sell this home, refinance my new home when the Central Florida home sold and plow the equity into the new home to reduce my payment or even pay the home off. I would then either sell stock or save up to purchase a $75K or so rental in the next year or two. However, I would lose about $35K in transaction costs (realtor commission to sell my current home and closing costs on another investment property). 

My idea over time would be to buy up rental properties for long-term holds.

Thanks for the input you all have, and I look forward to hearing your expertise and insight.