Rent Out or Sell in Austin area

[Sean Craigg]

I'm moving to a nearby neighborhood so the decision is: Do I sell or rent out?

Info:

House value: 850K in a top public school district next to the top school. This is in central Texas, close to Austin TX so it's likely to increase with the big companies moving in.

Rental rate: 3.5K/month (Tenants would be middle-to-high income families with school-aged kids)

The house is almost 20 yrs old so could use some paint touchups, flooring buffing, toilets, etc. but overall in decent condition.

I'm thinking I'll fix these things as a rental so I can deduct it from the rental income and then plan to sell in 3 years to keep the cap gains exclusion as a primary residence.

Rental rate doesn't pass the 1% rule of thumb. How would you make the decision in this case?

Any feedback would be appreciated.

[Ryan Kelly]

@Sean Craigg there is an Austin form if you want to post there as well. I’d need a lot more info to be able to provide you an opinion. Here are some additional questions:

- What did you pay for it?

- How much do you owe?

- Will your estimated rents cover all expenses (mortgage, taxes, insurance, property management, etc)?

- Do you own other rentals?

Nothing meets the 1% rule, and most not even close in Austin. That rule of thumb has long been revised for most major metro areas. The key is cash flow so you can maintain the asset.