Sell primary upon move, or hold and rent?

Question

I bought this house in 2013 for $144,000 at 3.625% over 15 years. I put 20% down, thinking I'd be staying in it for longer. It could probably rent for $1200 right now or sell for around $160,000. My balance on the first mortgage is currently around $98,000.

I'm in a situation where I'll be moving 4 states away in November and I want to start investing using the BRRR strategy after the move. If I sell the house, I'll have around $65,000 to start. If I refinance it at 30 years and rent it out, I'll have around $35,000 to start and a cash flow of $300-$400 from this house, not taking refi fees into account. I also have access to 30K credit at 12% from a credit card which I would probably use to rehab.

I'm considering keeping it because it's on a 1 acre lot in an area with a lot of luxury houses being built(350K to 430K). It's also within walking distance to a top rated school. It's value doesn't seem to be in any danger of going down anytime soon. There's the speculative aspect: the house is on septic now, but if it becomes possible to tie in to the public sewer, the lot could possibly be subdivided according to zoning laws, after which half the lot could be sold for a nice sum. I would guess $50,000.

This house will be one of the smallest and cheapest in this school district to buy or rent. Finding buyers or great tenants won't be a problem. It would be less stressful on me to sell, but keeping it shouldn't be much trouble either.

Is there an obvious best course to take that I'm missing, or does it just come down to personal preference?

Kevin Harrison · Answer

Maybe this can help you out.

https://www.biggerpockets.com/forums/48/topics/305...

Justin Cooper · Answer

Where in Central Maryland are you heading?  I know some folks out that way and might be able to connect you.

I can understand your resistance to working with hard money lenders (I am one!) and partnering, both because you are shy and you also probably don't want to pay the HML's fees and give up part of the deal to a partner, but there will not be a better way to learn your new market then to be networking, going to local REIA's and talking to lenders.  I hate to say it but you might have to step out of that shyness comfort zone.

Good luck and let me know if I can help.

Justin Cooper · Answer

Hi Jeremy,

Great question and I like your last line.  Yes, I think a lot of it comes down to personal preference.  That is what is so great about REI, we can really make it our own and do not have to follow any certain path if we don't want to.

That being said, what is it that you really want to do, and how easy is it for you to do it? If you want to own rentals in the new town, and you want to buy fix and hold, are you in a position to do that right now? do you need money from the GA property to make that happen? what is your risk tolerance, specifically regarding having a rental 4 states away and also the loan to value you might be at if you refi and pull cash out.

It seems like you already know or at least are leaning a certain direction.  Sometimes you just need to trust your gut and go for it!  What's the worst that could happen?

no seriously, what is the worst that could happen?  if you think that through and are still OK, then go for it.

Coop

Anthony Angotti · Answer

With all of those details I would probably rent it, but only if I could find a reasonable and good property manager. Do you have someone local that could also drive by every once in a while?

Also, it seems like you'd have plenty of money left to start somewhere new.

I'd rent it and keep that income.

Christian Sifuentes · Answer

Same here @Justin Cooper for any HML contacts in MD.

Naymar Maxwell · Answer

Wow, what a small world.  My husband and I are in the middle of our move from Augusta,  GA to Howard County, MD.  Best of luck with your move! @Jeremy Ashford. @Justin Cooper I'll take the HML contacts here in MD,  definitely something I want to keep in my back pocket.

Jeremy Ashford · Answer

Thanks, @Christian Sifuentes. I didn't know there is a meetup in AA county. That's probably where I'll be living and looking to invest mostly, so I'll look into it. I've lived in Baltimore for a couple years and Ellicott City for a while so I have a pretty good familiarity with the general area, but I wasn't into RE then, so I have a lot to learn. Any advice is appreciated.

Jeremy Ashford · Answer

I'm going to be investing in Howard County, Anne Arundel County and possibly Baltimore. I'd like to start with some lower dollar properties in Glen Burnie or Linthicum just to get some experience.

I really appreciate your advice and especially how delicately you put it. I should have said I want to maintain as much control over the process as possible and would rather my first property only involve me for simplicity. There is a certain humility in being a newbie that I'm probably subconsciously trying to avoid, though. I'm generally not a shy person and don't have any social anxiety about networking per se.

I've decided I'm going to join the Columbia REIA after the move. Hopefully I can get some good contacts on BP before then as well.

Thanks again!

Jeremy Ashford · Answer

Anthony, I do have local people who could go by there if needed. Thanks for your input.

Coop, first of all, I should have explained that the money I'd have to start out with up there in the two scenarios is the home sale or cash-out refi proceeds plus a projected $19,000 in savings I'll have by then. That should make the math make more sense. The potential cash-out I'm accounting for is assuming a 70% LTV refi less the $95,000 I'll owe by then. Perhaps I should get an appraisal and talk to a bank to see if my numbers are accurate.

On one hand, I want the maximum amount of cash possible so that I don't have to rely on hard money or wholesaling to start out. Half of that is me wanting to "make it on my own" and half is being kind of shy of an unfamiliar process of borrowing hard money and/or partnering with other investors.

I think what it all comes down to, is whether or not I can start out in central Maryland with only $35,000.

Then again, if I try to start out with that much and can't, I could always sell the house later. I think I found my answer. Thanks guys.

Sell primary upon move, or hold and rent?

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