Advice on a complicated situation (at least complicated to me)

[Jeremiah O]

Hi all,

My wife and I purchased a home 7 years ago (at the high point of our market). We still owe more on the home than it is worth. We are considering moving and I am trying to analyze each option. My 2 options are (1) sell our current house at a loss and buy a new one or (2) turn our current property into a rental property (which we would be renting at a loss) and buy a new house. Here is the info.

Option 1 - sell now:
Since we will be selling at a loss, this would require us to pay about $30k at close, which reduces our savings for the down payment on the new house.

Option 2 - rent:
As stated above the rent will not cover our expenses on the property, we will have about a $10,000 loss per year on the rental. To analyze this option, I looked at if we sold the house 5 years down the road and then 10 years. I assumed a 3% appreciation of the current house value.
With those assumptions I calculate:
After 5 years=$14,000 loss on sale
After 10 years=$19,000 profit on sale

I know that in general investors do not hold a rental property that does not cash flow, so maybe the answer is cut my losses now. The downside of that is that we lose $30k that we could be putting into a down payment on the new house. Any advice is appreciated.

Thanks,
Jeremiah