Should I sell my house or rent it out before moving?

Question

Hello, I bought my first home in texas just about 2 years ago, a 2011 built 3 bedroom 1500sqft home for 124k. I owe about 91,500 on the home now and it's worth around 140-160k now. I'm on military orders to move to San Diego at the end if june. Ive been debating selling the house in texas and trying to buy in CA. however I'm having second thoughts about selling now. I already have a buyer (current tenant) and we agreed on a sale price of 152,000. However this is my first time selling a home and I know there will be other costs involved with selling the house. I'm wondering if its better to just keep the house in texas and rent it, out or sell the house with the intent of buying in CA (but san diego is very expensive). I'll only be in CA for two years so maybe its better to just rent a small studio during my time there and keep my house in texas. Any advice is appreciated. Thank you

Mark Frattini · Answer

@Andrew Oddo

Are you interested in growing your real estate portfolio? If yes then rent out the home in Texas. Buy something here in San Diego that you can house hack and rent out when you leave in two years. Not interested in growing a real estate portfolio? Sell the house in Texas and pay the selling cost. No taxes on the equity gains which is great. Find a nice rental in San Diego and easily pick up and move in two years.

I'm guessing since you're on BP you are more interested in the former than the latter. Not sure what your current portfolio looks like now but if it's just the SFH in Texas I recommend keeping it. Selling your only piece of real estate in one of the fastest appreciating times in history and renting isn't ideal in my opinion. Unless you are planning on redeploying that capital into another asset that is going to outperform real estate.

Theresa Harris · Answer

Typically if you are only going to be living in a place for 2 years, you are better off renting.  The costs of selling and buying a home will quickly eat up any appreciation that happens.

For the current home, will the rent cover all of the costs?  Not just mortgage, but taxes, repairs, etc.  Are you able to manage it remotely if the current tenant leaves?

Elissa Scotland · Answer

In your shoes, I would keep your Texas house. Start thinking of it as a house, an income-generating house. Not your home.

When you move to San Diego, see if there is a way that you can house hack a rental. ie rental arbitrage.  Rent a two bedroom place and sublet the second room to subsidize your share of the rent. You could live in the smaller room and rent out the master.  The ultimate aim is to live at least rent-free while preparing for your next property purchase.

San Diego is a lovely place, but it is expensive to live where others vacation.

Greg H. · Answer

@Andrew Oddo

I hear you.  However, back to my point.  Now you have a home with 10 year old mechanicals.  Are you prepared to pay $1200-1500 for a hot water heater, $5-6k for an A/C, stove, dishwasher etc.  A make ready when a tenant moves out could cost you $3000.  The military has taught you and I to always be prepared so use that when making a decision

I have been at this for more than 30 years and spent a good amount of it doing deals in military towns and seeing/hearing the downside of your plan.  Don't make a decision over not wanting to spend a few thousand in closing costs

Greg H. · Answer

I am going to take the opposing view.  I cannot tell you how many times over the years I have seen soldiers get wiped out on these type of deals.  Unless you have a large reserve account to take care of large repairs and vacancies,  sell the property.  What would you do if you had a 2 month vacancy?  Had to spend $5000 on a new a/c?  Even little items can add up.  Any profit you make is tax free so take the profit and run

Andrew Oddo · Answer

I hear you on this. Some more details, the home in Texas is a 3 bedroom 1500 sqft built in 2011. Ive had virtually no problems since Ive owned the home, and I only owe ablut $91,500 on the property. Taking profits selling looks appealing, but I'm not sure if costs of selling are worth it, especially if the market continues to go up where I am. I'm currently searching for VA loan lenders in San Diego and looking to buy a triplex or fourplex in the area with no money down. It could be a great situation living in the smallest unit and renting the others.

James De Leon · Answer

@Andrew Oddo

Hi Andrew,

When it comes to your house in Texas I would say that it depends on your goals. If your goal is to get passive income then keeping it would be ideal. If you have a different goal such as stashing capital then of course you should look into selling it so that you could possibly redeploy that capital into a rental property, etc.

If you were to sell your home for 152k assuming you don't have any realtor fees (since you agreed a price with buyer) if you go that route conservatively you're looking at between 5-10k closing costs. Which would equate to about 45-50k profit, which would be awesome! If your house cash flows right now and you goal is passive income then I would definitely hold it.

Next up, I would like to you welcome you to San Diego Andrew! This city is awesome but like you said can be quite expensive. With having your VA loan it becomes a bit easier to get a house even with the prices. I was able to get a 4 plex close to downtown SD and I got paid to buy the house since I used VA loan to acquire it (E5 pay). If you choose to buy here and hold it then that would be a viable option as well. Again it really depends on your goals and what you want to accomplish. I'm sure whichever route you choose, it'll be a good one!

Let me know if you have questions and I'll be happy to connect and answer questions. Good luck!

Matt Stricklen · Answer

I agree. If you can keep your housing cost low in CA, keep your foothold in Austin. There is a lot of room for continued appreciation on your property here, you've already got the landlording experience...let it ride for a couple of years.

PS thank you for your military service.

Kevin Hickey · Answer

Hey Andrew, it all depends on how you want to invest in rental property and what you're comfortable with. If you are comfortable with keeping your house and living out of state, then you should keep it. If being out of state and having tenants in your property which may cause a headache is not what you want, then you should sell it. Like Mark said, your net is tax free.

Do you know for sure you are only going to be in San Diego for two years? I have met many military veterans that have said the same thing and ended up staying in San Diego much longer. Also with having availability to a VA loan, you could have easy access to buy a property here in CA. As you know, there are many more advantages of home ownership than renting.

Adrian Fajardo · Answer

Hello! There is a wealth of knowledge on this thread and all of them are right in terms of exit strategy. If I was in your shoes, I would begin in the end in mind then work backwards from there. Think of the long-term implications. Pull up a calculator and see what would give you a positive on the bottom-line. If you're unsure what to do, it just means you don't know what outcome you want to achieve. Once you know that, everything else will fall into place.I wish you the best in your investing Journey!

Should I sell my house or rent it out before moving?

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