Need ideas, Trying to decide sell or rent my resindence

[Maurice Mugabo]

Hi BiggerPoketers, I am thinking of moving my family to a bigger residence, on the other hand, I have been on bigger pocket for a while and my goal is to get the knowledge and

get ready to be a landlord. I am thinking of taking this opportunity and start by renting my current home instead of selling it. Here is the situation:

- Currently owns a town home 3 bed 2.5 bath, 1,677 sqft, year built 2008.

- it is worth $245-250K.

- Mortgage balance $177K.

- FHA 30 year fixed, rate at 3.75%.

- Monthly payment $1,224: Includes Mortgage&Interest, Taxes&Insurance, and $80/month PMI that will be taken off within the next 12 months.

- Definitily A-type neibourhood with 10/10 schools all around.

- There is also a high HOA, $170/month.

If I decide to rent it out, the expected rent in the area is $1650-$1700, it is in a pretty good shape and no upgrades needed, hard wood floor, granite counter top, it's all there, I don't expect heavy maintenance in the neat future.

Let me know what you think, is renting it a good idea? With the numbers, there is nothing much left as positive cash flow, but on one side I think it might be a good idea to sell it

and in the near future start looking on the other side of town for properties that are in areas with many renters and look for better cash on cash return, on the other side, I currently have a very

young family (2 very young babies), can't really find enough time for a more aged property that will need time for maintenance/finding contractors etc... So I am considering this to be my safe/quite entry into the business.

Thank you.....

[Ross Denman]

@Maurice Mugabo I am not familiar with the GA market, but I usually discourage my investors from investing in condo's. Rent rates in my market (Indianapolis) don't change very much year to year, but HOA's notoriously increase annually which reduces cash flow each year.

With that being said, most people who are renting out a mortgaged home are doing so with an equity based model as opposed to a cash flow based model. The benefit is having someone else pay down the principal of the home. There is also the potential that the home will be more valuable if you wait to sell it later, but that is speculative and not something to base the decision on in most cases.

I don't know if the $50k+ (after closing, commissions, etc.) or so that you would get from the sale would go very far if you want to roll it into another investment property. This will likely leave you with more headaches than you will have renting your condo. While you will only cashflow $100-200/mo on your condo, you would be building another $6k/year (or whatever) in equity in the home. If investing $50k in purchasing and renting another property, you would probably only be looking at $500-600 net cash flow or $6-7k/year with more headaches than renting your condo.

I think that renting the condo is the more profitable solution. The other option would be to sell the condo and use that money as private money loans to other local investors. If you charged 1% monthly payments, you would easily make the same kind of money or potentially more with no tenants and no property management. Money lending comes with it's own headaches and liabilities, but wouldn't be as time intensive as some other alternatives.