Need Input - Should I rent my home

[Paul Farley]

I am attempting to plan the next steps of my life. There are a couple different strategies that I am listing below. I would appreciate your opinion, but without too much bias with this being a Real Estate investing site ;).

Background:

I landed a good secure job last year and things are going well. I also operate a web design/digital marketing company that help produce extra income.

Currently, I live in my childhood home with my family (wife and two kids - I am 30 years old). I inherited the interest of the home and finished paying off the mortgage last year. I own 62% interest of the home and my sister owns 38% (we worked it out this way and the deed reflects this). We were planning on moving into a new house this past summer, but I felt it would be smarter to wait until next summer. We REALLY want to move, but at the same time I want to be smart with my decision.

The home is realistically worth only about $80,000. 

Dilemma:

Again, I want to move bad, but unless I would sell my home now, I would not be able to get the home I want. If I did decide to move now, after selling, I would use the money from the home to pay off student loans and to have some extra. 

I started thinking about my current situation though. Not many people can say that they own a home and don't have a mortgage. All I would have to do is buy out my sister's interest of the home and then I could put the home up for rent and make profits on it without having much overhead just taxes, insurance and repairs (at least I think).

My home requires some work though. If I was going to just sell the house, I was going to do only the necessities and then put it up on the market. If I would buy out my sister's interest, I would repair more than that. The home could use windows, hardwood refinishing, furnace in the future, and basement carpet are the major things.

Before I would even try renting out the home I would want to pay a good chunk of my student loans off (if not all) and then pay off my sister - around $30,000. I would also do some minor repairs and eventually do the major repairs, though I would potentially refinish the floors - let's say that is $2,000. Paying off all of this would be $62,000. 

Strategy Options:

Strategy 1 - Sell my house

Pay off as much student loan debt before this summer. Sell my home and just buy a new house.

Positives - Short-term benefit of spending less and getting satisfaction quicker. I wouldn't have to worry about paying off my sister as it would come out of the sale of the home. I can put my kids in a better school district, feel better about where I am living, but I would not be where I want to be financially yet. 

Negatives - We have outgrown our current house and really want to move. The purchase of the new home would take away a lot of my disposable income I currently have. Vacations and the style of life I live now would be drastically reduced.

Strategy 2 - Rent my house

First, pay off my student loan debt. Keeping this consistent with the first would position me to be able to buy a home at anytime if I decide not to rent my home. Then after I would pay off my sister's interest. I then would spend more money to get the house ready to rent and look into the business side/league aspects of renting a home.

Positives - Long-term financial benefit; I would assume that I can get roughly $900 a month renting this home - after taxes and insurance it would be safe to say I would profit $725. I would always have a fall-back home in the case something happens financially. I want to have multiple rental properties at some point, so this would be my first and it is ideal by not having a mortgage. I could use the extra $725 to offset my new mortgage or invest with it.

Negatives - I push back getting a new house by at least a year or two. I take a risk with my house in the fact that it is older and having to spend a lot of money in the future in repairs for tenants. I will have to move my kids to new school districts.

Questions:

• Do tenants occupy rental homes longer than a duplex/condo?
• Is it more difficult to rent a home?
• Does it make sense to rent my home? 
• Is $725 profit realistic with a $900 rental fee without a mortgage?

What do you all think? What makes more sense? Let me know if you need more information.