Should I refinance my home before leasing or just sell it ?

[Cindy Nguyen]

I am currently thinking about leasing my current home then move into other home.

The house worth about 500K (3875 sf, 4BR, 2 car garage, 10 year old) and remaining principal is 170K. My current monthly mortgage is $1978 (8 yrs remaining for 15 yrs refinance) and $1300/mo needs to be allocated for property tax.

The problem I have is if I lease the house with current mortgage payment, I would not make any positive cash flow due to higher monthly payment and high property tax rate 3.15% (Yes, it is Texas).

According to the local realtor's rental comp, the rent for my house would ranges from $3100-3600. This barely covers current mortgage and Tax.  There is no extra money left to cover any other expenses.

Because the house is located at a nice family oriented Houston suburb with good school, has a lot of commercial employment around the area, I could expect the steady appreciation of the property with quality tenants.

If I refinance my current home for 30 years, with current rate (Let's say 3.85), the monthly mortgage would be $800.  With $3100 rent, I would have $2300 for Operating Expenditure and hopefully some cash flow.

My estimate Operating Expenditure total is 2530 . (Tax 1300, Insurance 320, Vacancy 5% 155, Repairs 5% 155, Capital Expenditure 5% 155, HOA 70, Lawn 75 , Property management 10% 310). 2300-2530= negative 230. Without property manager and higher rent, there is some potential for some positive cash flow.

Do you think it is a good idea to refinance and lease the house?  or

Do you think it would be a better idea to sell the house, use the equity to buy smaller cheaper rental property in lower property Tax area ? - - my plan B would be 3 BR up to 2000 sf single family home with 150-200 K price range with lower property Tax rate of 2.6 area.

[Fred Heller]

In my opinion, high-value homes do not make good rentals. You're not going to get enough in rent to justify tying up your money in the house. Plus you have higher taxes and insurance, and you lose the homestead exemption. And high-rent homes frequently take a lot longer to rent because there's not a very big pool of potential renters. The home could sit vacant for months. I would sell it and use the proceeds to purchase 2-3 more modest homes.