Should I sell or rent my current home?

Question

Hi all,

I'm looking for general advice on whether I should sell or rent my current single-family home.

Current Home details:

Purchase Date: 11/10/2020

Total Purchase price: $435,000

Downpayment made: 20%

Remaining Mortgage Balance (as of today): $327,000

Monthly Mortgage: $1,971.42

Mortgage Interest Rate: 2.50%

House Build Date: 2018

House Type: Single Family Home.

Local Area: Thornton Colorado (Adams County).

Zillow rent estimate for this property: $2,714 (have no idea how accurate this is for the area)

Other info that may by useful:

- I have no experience as a landlord but am open to it if profitable. I'm somewhat interested in renting as I have free time (no kids) and it would give me something to do. But the most important thing to me is if it's financially sound.

- I'm looking to move into new house within the next year. I'm hoping rates will take a dip below 5% but we'll see.

- I have a down payment saved up for my new house purchase and don't need the equity in my current house for anything.

Does it make financial sense to rent or sell my current house?

Thanks in advance for any and all advice.

Jack Krusinski · Answer

Here are some factors to consider:

• Rental income: The rental income you can earn from the property should cover your mortgage payments, property taxes, insurance, maintenance costs, and other expenses associated with renting out the property. If the rental income is higher than your expenses, then renting out your home can be a profitable option.
• Market conditions: Consider the current real estate market conditions in your area. If the market is hot, you may be able to sell your property for a good profit. However, if the market is slow or prices are low, you may not get the best return on your investment.
• Landlord responsibilities: Being a landlord requires time and effort to find and screen tenants, manage repairs and maintenance, and handle any legal issues that may arise. If you are not prepared to take on these responsibilities, then renting out your property may not be the best option for you.
• Tax implications: Selling your property may result in capital gains taxes, while renting out your property can provide tax benefits such as deductions for mortgage interest, property taxes, and depreciation.
• Future plans: Consider your future plans and whether you need the equity from the sale of your property for a down payment on your new home.

Based on the information provided, it seems like renting out your property may be a profitable option. The estimated rental income is higher than your mortgage payments, and you have no immediate need for the equity from the sale. However, you should also consider the other factors mentioned above and weigh the pros and cons of each option.

Brittany Guimond · Answer

Hi @David S. — Shoot me a DM with the address and I can run some rental comps and projections for you. I personally held onto my primary and turned it into a rental when I bought my next primary, and it cash flows like CRAZY. I also live nearby and manage it myself. I don't know your specific situation, but I personally wouldn't sell a home with 2.5% interest rate and a mortgage under $2K. Sellers are making concessions left and right, and rate buy downs are very popular right now, so don't get too stuck on waiting for them to drop below 5%, there are ways to get that rate right now with seller concessions. Anywho, shoot me a DM and I'll help you with the rental comps and rental cost projections, that should paint a clearer picture for you.

Brett Deas · Answer

I actually just finished helping a client turn their primary into a rental when they moved. I think if you have the DP for the new place already saved, you might as well go for it. The risk is mitigated and if needed you can always sell.

Jevon Shaw · Answer

Don't go by Zillow rent estimates. Go by what actual people are listing their comparable rentals for in your area by searching through the Zillow rentals section. It seems to make financial sense on paper based in the info you've given. Try to be as buttoned-up about it as possible from the get-go meaning:

Standard background checks

Try not to rent to friends and family

Stick to what you say regarding your policies, ie late fees assessed on the 7th day, only one pet allowed, etc.

These things will help your rental stay profitable despite you being new and a little inexperience. Hoping the best for you!