Sell Personal Home to Cash Out Equity or Turn into a Rental?

[Robert Fisher]

I’ve read some of the forums posts on this topic but all seem to be unique to the situation and the numbers, so I thought I’d make my own post. We bought our first home about 5 years ago at $132,000. We did a live in flip and it’s time to move on to another that’ll support our growing family. Our realtor thinks we should be able to sell in the $185,000 range. We still owe about $95,000. I’ve been thinking that we’d keep this house and rent it, but lately I’ve been thinking it probably makes more sense to cash out that $90k and use it toward down payments on multiple rentals instead. Our mortgage, interest, insurance, and taxes come to about $750 and we have a friend that works with a rental/property management company that thinks we could get in the $1,500/month range as a rental. So we’d be cash flowing $750/month before accounting for vacancies, repairs, etc. though vacancies should be minimal since there are 3 colleges in this town. So here’s my question. Do I take the money and run to invest elsewhere or hold and keep the cash flow? Is there some formula or golden rule for this decision?