Sell my first house or rent it out?

Question

I bought my first home (mobile home) 3 years ago with the intentions of fixing it up and selling it a few years later to make a profit.  I bought it foreclosed on for 53,000 (424 a month) and put 2000 down.  Over the years I put $15,000 in it and did all the updating and repairs myself.  Its fully updated now, hard wood floors, porcelain tiles, new windows, fresh paint, new front door, updated bathrooms, etc.  My intentions were to sell this house and use the capital to buy a buy and hold investment property and find another house to live in and repeat the process.

My realtor said I could sell it quick for 100,000 ( hoping for 115000).  I owe 48,488 and i figured after commissions and fees I would net somewhere around 44000.  Then pay some other debt off which is 15650 (600 a month 26 more months to pay off), which would leave me with 28,350 to invest with and find another home to live in.

My other option is to rent it out,  on rentometer ( not sure if reliable source) it said the average rent would be 1100 which i figure i would net around 550 a month, 6600 a year.  Which seems good compared to other houses in the market.

Im a newbie and I just can't seem to wrap my head around which would be the best choice.  If I rent it out all my profit goes to paying down debt for the next two years.  If I sell it I start fresh but have the fear not finding as good of a property with that monthly income. Any advise?

Drew Wiard · Answer

Personally, I chose to rent my first home after we moved out 8 years ago, and it has been GREAT.  only 3 families have come and gone with only 2 weeks of vacancy during the whole time.  Assuming you screen VERY well, and your property is attractive to renters, I think you'll do well.    ...but to Jon's point, the question might not be, to rent or sell, but rather, what ELSE can you do with the funds if you cash out now?  What's your ROI by renting vs what you might be able to do should you sell.

...that said, I do not regret renting my first home.  Good choice for me.

Jon Huber · Answer

@Jason Evans  It sounds like you are in a decent situation either way. I want to first say that I am in no means any credible source to give financial investment, nor do I know the complete details of your situation. I will simply say, that if I were in your shoes with the details you have provided, what I would do. I would sell the mobile home and use the $44k to invest. This would allow you to get an FHA with little down for a new primary home to live in, and if you decide to not use it all on something extravagant, you can have money left over to invest in other properties at 20% down. You will be limited to the areas to invest in, so you will need to do some serious homework. So, if I were you, I would be asking myself... can I expect to do better than a $44k return on a $58k investment of a mobile home? I am not familiar with your area enough to answer that, but it is certainly a question worth pondering.

Jason Evans · Answer

Thanks for the insight @Mark Gruetzmacher.

Im considering selling on my own.

Kirk R. · Answer

FSBO it for what you want - if you can't rent it.

Mark Gruetzmacher · Answer

@Jason Evans For the money you have invested and the amount of money you can make, I would consider selling.  Get the money while you can.  Back about 8 yrs ago I had such hard time getting a loan and also insurance for my doublewide.  Granted mine was older than yours as well but most places told me that they would loan on them until about 15 yrs old or newer.  Insurance was somewhat weird as well.  Sometimes after a cetain age the insurance is either actual cash value or will change over to actual cash if they get too old.  Alot of headaches.  Not if it was something you only had 25K into and didn't have the chance to make the amount of money you can make if you sold it, then I would keep and rent out.  The double wide I had I bought for 13K, added a garage, mudroom, family room and another bedroom.  Split the land it was on then sold it.  I lived there for 9 yrs.  Figured I had maybe $40-50K into it when I was done and sold it for $115K.  It was such a relief to sell it.  I deal in single wides for rentals now but my invest is smaller as well.  What ever you decide, just make it work for your situation.

Jason Evans · Answer

@Ricardo G. Thanks for the advice!  No the interest isnt that high. I only got two more years also, it seems to make sense to wait it out.

Ricardo G. · Answer

@Mark Gruetzmacher great, so $1100 is your number, now on to make your decision.  I would personally sell the property and use your gains to:   Acquire a primary residence to live in and  Reinvest the remaining balance on another flip.

With regards to your other debt of $15650, is the interest so high where you HAVE to pay it off?  If not, I would rather use the money somewhere else.

Jason Evans · Answer

@Mark Gruetzmacher Its a 2000 1232 sq ft and its on a brick foundation.

I checked out craigslist and zillow and similar properties are around 1100 mark.

Ricardo G. · Answer

I have no knowledge of mobile homes (yet). But I always hear to stay away from them as they tend to always loose value. But there are some great short term investment strategies to be had according to @john Fedro from BP podcast  75: mobile home investing and getting started.  As far as average rents, I ALWAYS use both Craigslist and zillow to compare rents in my area. I do my own property management.

Sell my first house or rent it out?

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