Rent out for a negative cash flow vs sell house at a loss?

[Sarah Vance]

Hey wise people,

I found myself in a bit of a predicament, and I am hoping you all can give me some insight. I bought a house and closed on July 2018. Below are the details:

Purchase price: 205K, 3% down, 5% interest (I know). Current mortgage with PMI, Escrow, Insurance = $1390. The current amount that I owe is about 198K. The house is a 3/1 in Asheville, NC - which is still, from my knowledge, a city that people are flocking to. It is in a part of town that a lot of people find desirable, walking distance to a common street and a common park. However, I am on a pretty busy street. The housing market here is hard for people who are first time home buyers or have a single income. Nonetheless, I bought this house.

Then life changed and now I am needing to move out of state. Here are the options I have thought about:

1) Rent it out.

The problem is that I don't know if I will be able to rent out my house enough to make a positive cash flow. Rent in this town and be anywhere from 1200-1600. I am thinking I could get $1400 a month on rent, but if I hire a PM then that number will decrease due to their fee. Not to mention taking into account end of year taxes, repairs, vacancy, ect..

I know I cannot hope for appreciation because that is never a guarantee. If I rent it out, I will probably have to have a negative cash flow of anywhere from 100-200. I considered not having a PM, but that sounds terrifying being five hours away.

If I do rent it out, and when I move to my new location, I will be renting. Overall my total expenses will be less even if I still am paying $200 a month towards my house is AVL. I plan on meeting with multiple property managers to get a feel on how much I can rent my house for, ect..

Option 2..

2) Sell it for a loss.

Since I haven't been in the house for a year, it has not appreciated. Although it did appraise for $215K, so there is equity already in the house. If I sell it I am assuming I am going to take a loss due to realtor fees/closing cost. Not to mention if I did make *any* money - I would have to consider capital gains because I have been in the house less than 2 years.

So - what is the best decision here? Neither is great, but how to I minimize my hurt in a equally messy decision? The other thing would be that I don't want to have this house forever and be an accidental landlord at a distance. Would it make sense to rent it out for a year at a negative cash flow and then sell it after having it for two years to avoid capital gains fees? Or is that not possible because it wouldn't be considered my primary residence for those two years?

I am very very new to all of this, and just trying to due my research prior to making a decision. I made a mistake buying this house, and I am trying to rectify it to the best of my ability. Thank you so much for your insight and wisdom BP!