Do I sell my current property or rent it out?

Question

The wife and I are expecting our first child in Jan. 2020, we just upgraded and bought another house on top of this house I currently own a condo valued at $490k , remaining balance on mortgage is $336k, and the unit is fully renovated (Monthly Payment: $1543.00) (Orange County, CA) HOA Fee is $385 per month, Property Tax $375 per month, and Insurance $86.00 per month. If I rented it out I would pull roughly $800 per month net as it would lease out for $3200 [4 bed, 2.5 bath, 1700 sqft], If I sold the property, I would most likely get $145k after everything is said and done.

My question is would it make sense to rent it out or sell it? My goal is to start a real estate portfolio and acquire enough homes where I can manage it full time and leave my current job (non-real estate.)

I appreciate any assistance/guidance from people that live and breathe this everyday.

-Keith (Newbie)

My question is would it make sense to rent it out or sell it? My goal is to start a real estate portfolio and acquire enough homes where I can manage it full time and leave my current job (non-real estate.)

I appreciate any assistance/guidance from people that live and breathe this everyday.

-Keith (Newbie)

Andy Freeman · Answer

I'd for sure hang on to it. That's really good cash flow, plus the principal pay down. If you have some other money saved, try getting started with that.

Brad Bellstedt · Answer

Does the property cash flow positively every month after all expenses are paid and your capx, maintenance, and vacancy reserves are added?

Can you purchase the next property without selling your current property(s)?

If the answers to both of those questions are "Yes" you should be buying the next property. That's my plan and I have similar goals.

Eric Lee · Answer

Rent keep cash flow

CJ M. · Answer

@Keith Moore

First check to see if your Association allows for rentals. If they don't you're pl utting thought into something that isn't even an option.

Hai Loc · Answer

@Keith Moore

You can look at it 2 ways

#1 you invested $82k to generate $9600 a year of cash flow. That's a double digit return plus your getting debt principal.

#2 you can sell and take the $145k and dump it on another property that can be yielding more than $9600 a year which would be pretty easy to do..

Whatever you decide there is no right or wrong but I think #2 will be a step towards growth..

Luis Vaca · Answer

@Keith Moore If you keep it how long would it take you to save up and continue on your goals and buy the next property? Do you have enough reserves now if you keep it? Keep in mind of the 800$ net some of that would be for reserves correct?

If you sell where would you plan to buy? Do you have leads coming in now so you could use the calculators and estimate how you would use the profits if you sold? ( And estimate coc)

Keith Moore · Answer

@Hai Loc: $410k Purchase Price with $82k down, no capital gains tax from what I've read as it was a owner occupied principle residence.

@Steven Vega: Thank you! My thought was if it made sense to sell the property I would try to purchase a multi family unit. Just a thought though, however, California real estate is pricey!

I really appreciate you both responding. Thank you!

Marylyn T. · Answer

My husband and I are in the same situation, but even worse. I am new to BP and have stumbled upon it because I was searching for a better way to solve our situation. We have lived in our current home which is in a highly-rated district in Southern California since 2010. Now that our kids are growing, we're thinking of upgrading to a newer and bigger home but to keep the current one as a rental (investment now, then inheritance for our kids later). Our dilemma is, we found a great home but we could not afford to keep both according to our lender: my husband is W2 but I'm self-employed who maximized expenses for last 2 years but can provide bank statements of gross deposits this year. The lender says no to my income. But even if we sell, there are repairs needed to be done and because we wanted to offer asap for the new home, we may only have the option of cash buyers like Redfin.com who valued our home low that after their 7% fee and repairs, we're left with barely even anything for our DP/CC/moving costs. I am hesitant to let go of the current home because rental comps are from 2400 to 2800, enough to cover the mortgage (PITI) of 2100. It is unlikely that we will find a comparable home like this that we can afford as an investment property. How can a small fish like us compete with institutional investors like Redfin who are flushed with cash? What are our options? We want to start investing in rental and growing our assets through RE for our kids. Log in or sign up to reply1Free eBook from BiggerPockets!Ultimate Beginner's Guide Book CoverJoin BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!Actionable advice for getting started,Discover the 10 Most Lucrative Real Estate Niches,Learn how to get started with or without money,Explore Real-Life Strategies for Building Wealth,And a LOT more.Sign up below to download the eBook for FREE today!Download the eBook Now We hate spam just as much as youRELATED DISCUSSIONSSTARTING OUTKeep or sell current home2 years agoLANDLORD FORUMS & RENTAL PROPERTY QUESTIONSKeep current home as rental?6 months agoSTARTING OUTRent my house and move?about a year agoRELATED BLOG POSTS & PODCASTSBiggerPockets Business 28: Marketing Funnels, Automation, and an Actual 4-Hour Work Week with Call Porter Founder Ryan Dossey2 days agoThe Changing Face of America’s Renters (& What It Means for Investors)about 2 hours agoHow to Be a Landlord: Top 12 Tips for Successa day agoRelated ResourcesBuying & Selling Real Estate Discussion8 Signs You Have a Bad Real Estate AgentShould You Hire a Property Manager? Here’s What to ConsiderDo You Really Need a Home Inspection?How to Build Rapport with Motivated Sellers3 Types of Motivated Sellers (& How to Win Deals By Solving Their Problems!)ResourcesRead, see, and learn more!Real Estate Investment CalculatorsBiggerPockets BlogPath to PurchaseMortgage LoansFind a ContractorReal Estate AgentsHard Money LendersReal Estate ListingsTOP CONTRIBUTORSJames Wise James WiseCleveland, OH9.52SCORERussell Brazil Russell BrazilRockville, MD8.02SCOREJay Hinrichs Jay HinrichsLake Oswego OR Summerlin, NV4.45SCOREDennis M. Dennis M.Erie, pa3.59SCORENick C. Nick C.Tampa, FL3.19SCOREBUYING & SELLING REAL ESTATE DISCUSSION TRENDING DISCUSSIONSClayton Morris has filed a privacy dispute against James Wise42 Replies"Millennials Should Be Happy They Are Stuck Renting"69 RepliesClayton Morris / Morris Invest House of Cards starting to fall.1385 RepliesMultifamily with unmotivated seller6 RepliesWhen/how do I begin investing?6 Replies

Matt M. · Answer

@Keith Moore

So when empty that property costs you $2400/month + any utilities. Oof. I’d sell, unless that $2400+ won’t hurt you if it sits empty at all.

Hai Loc · Answer

@Keith Moore

I would rent it out. That's solid cash flow

How much was your initial investment?

How much of the $145k on the net sale would be capital gains?