Rent or Sell - newbie

Rent or Sell - newbie

Carrie S.Pro Member
Dallas, TX · Member since 2015 · 4 posts · 1 vote
Hi - We are moving out of our 2/1 paid for house to a home with mortgage in Oak Cliff, Dallas, a very hot area experiencing gentrification and rapidly climbing real estate prices. The home is a well cared for 1920's house that had some updates but still has quirks of an older home, meaning it will require some maintenance. We are trying to decide whether to rent or sell. We have one other rental home in a suburb of Fort Worth that cash flows nicely. My goal is to leave my current job by next year to get a job related to RE and closer to home. We don't know whether to sell or rent, and if we sell where to put that cash. We are risk averse and debt free. If we rent the house, it will offset our new mortgage quite a bit. If we sell, we could put that cash into our current home and potentially pay off our current rental increasing our cash flow there. We can technically make it on husbands salary with rents coming in while I transition or quit my job, it's just not a ton of money and would require lifestyle adjustments. We are frugal, so while not as comfortable, it could be done. The house we have rented now has long term tenants who are signing up for another year. I have considered trying renting the home in question for a year before deciding. I have a taxing and time consuming job that keeps me away from the house a lot already meaning my husband would have to do some of the maintenance. He gets it and is supportive of me but is not of the investor mindset so he wants to sell. I'm eager to hear any suggestions. Here are the details: Home price if listed today: 150K Mortgage: 0 Potential Rent: 1200 a month Current Taxes and Ins per month: 338 New taxes insurance when rented: unsure yet Rental House Balance: 95K Cash flow per month: 400 New house Payment incl taxes and ins: 2K
0Reply
20 views

5 Replies

Jump to latestLatest
  • Architect · Papillion, NE · Member since 2015 · 1k+ posts · 840 votes
    11y

    You can always try renting the house out and if it doesn't work sell it.   I have a 2br/1bath and am glad I decided to rent my house out when I moved in with my fiancé last year.  I profit $300 a month but I still have a mortgage, so i'm quite happy with my numbers.  You do have a niche market to rent to but I was able to rent it in one week on craiglist.  Getting it rented was my biggest fear but was quite surprised on the interest I got when I posted the ad. 

  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    11y

    Depends on whether you want to increase your rental holdings or not. If so, you should work some of the equity out of the other house and pick up another home or two that cash-flow like what you have now. Being completely risk-averse means you will have to really bust it out to earn everything you can financially from your back (or mind, as it may be), and I would actually say you're not that risk-averse as you already hold one rental property that is not paid for. 

    If you're looking for the best multiplier of the funds you have in the paid-for house, purchasing two or three other units would make the most sense. If you want to have the least possible payments per month, then you would probably sell the other house, pay off the rental and use the remainder to put a larger down payment on the house you're moving to. 

    Skyline Properties
    View Page
  • Michael BarbariPro Member
    Banker · Downers Grove, IL · Member since 2014 · 396 posts · 107 votes
    11y

    @Carrie S.

    You're in a great situation. Good for you. I would do the following given you want to quit your job and focus on RE.

    1. Rent out

    2. Take out a heloc and purchase more properties with it.

    Paid off properties can be leveraged to purchase more to increase cashflow. The cashflow can be higher than having no mortgage. Look at all your options. Good luck!

  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    11y

    Congrats on having a paid for home!  If you have occupied the home as your primary residence for more than 2 years, you should qualify for the section 121 exclusion for a tax-free gain.  Do you have  a lot of equity?

    The IRS rarely gives a pass on gains.  I would at least consider that.  If you do rent it out, consider selling within 36 months to take advantage of that.

    I love rentals, but would not be a long-distance LL.  Will your new  place be further than about 45 minutes away @Carrie S.?

  • Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes
    11y

    @Carrie S.

    Try not to sell.  Jim Rohn in one of his older videos talks about a property he owned in Cave Creek, AZ.  He said he sold, but he didn't have too.  At the time of the video the property was worth 10 fold from what he sold for.  

    The US dollar is funny money.  Hold onto income producing assets.


    Frank

Join the conversationCreate a free account to reply, vote on answers and follow this thread.