Should I keep my “beach town” home as a rental?

[Nadine Russell]

I’m married with two kids, a third on the way. I’m looking at buying a bigger home to accommodate Kid #3 (currently we have 3 beds 1 bath, small house), and we would like to be in a more rural setting.  When we bought our current house we paid $134, it’s now worth around $250, 6 years later. My husband thinks we could get more than this but who knows.  We live in a beach community. The house is a close enough walk to the beach and downtown that we could eventually rent it out weekly in the summer.  The town is doing a lot in terms of development/ improvement of public spaces. I feel if we sell our house to buy a bigger one, we will regret it down the road because of its huge potential. My biggest concern is that it needs a new kitchen in order for me to feel confident I could rent it for enough that we would have a positive cash flow. My husband can renovate it himself (he did the rest of the house), but if we buy a new home we won’t have the cash to do it until probably next spring.  My plan would be to rent it out monthly with the crappy kitchen, knowing I’ll lose money on it for a year (hopefully not much longer than this), then once we are able to renovate the kitchen, we should be able to generate some good cash flow.  And with a new kitchen it would be worth more of course. It all feels a bit risky and speculative (but I don’t love debt). I work full time (mid six-figures) and my husband works but makes significantly less and will be at home with the baby for a while.  If I can afford to float all the payments for both houses with it being vacant (worst case scenario) is this “safe” enough to at least try keeping it for a while and seeing how it goes? I think I have enough career stability that I could always find decent -paying work if I lost my job for some unforeseen reason, and of course my husband can always work more. I worry a bit though that it will be tight, and that I’m banking on appreciation a bit.  On the other hand, I’m young, I have a good job, now is probably the time to take risks and try things.  I wish I had been better with money earlier - I had a lot of debt which I refinanced to pay off, otherwise the mortgage would be so low now that it would cash flow easily!