Deciding on Renting or Selling Primary SFR

[Joseph Kray]

Post

In an effort to lower monthly expenses I have come across the opportunity to live at a lower monthly rate. With a hot real estate market in my area and extremely low rates I am torn between refinancing and renting or selling the home. Here are some details below.

Purchase Price 164k

Current Payoff 155k

Current PITI $1350

Rate 5.1%

Term 30 Year

Length of Ownership 3 Years

High LTV Conventional with no PMI

Refinance and Rent

Refinance Rate 2.65%

New Loan Amount 164k [Finance all in due to low rate]

New PITI ~$1080-$1110

Market Rent $1800

Cap 7.5%

Vacancy 5% at $90

Management Fee [Self] 8% at $136

Maintenance Cost $100/mo

Net Cash Flow $370/mo

Annual Cash Flow ~$5k

Sell

Market Value ~$210k

Fees/Commissions/Clean-Up ~$20k

Profit ~$38.9k

Annual savings in current income scenario from lowering monthly housing expenses due to renting or selling ~$18.3k

Renting thoughts - Adds the SFR to begin my investing portfolio, interest and tax write offs, tangible asset, the possibility to use the property again in the future. ‘Passive' income opportunity, ability to borrow against/use as collateral in the future.

Selling thoughts - Hot market, afraid values may not come back around like this in the area, opportunity to use the profit to obtain and hack a multi family unit in the future. High taxes for the space/area, not fond of the homes layout for future use.

Goals - Preferably invest in small multi units. Begin increasing monthly income to supplement day job. Lower living expenses as much as possible to create future investing opportunity faster.

Any thoughts? Anyone in the same situation?