To rent or sell?

Question

Trying to decide if I should sell or rent my townhouse. Value is about the same as what i purchased it for 8 years ago. I have about 30,000 in equity and will be looking for a larger home for my family. I'm thinking it would be a great investment down the road. If i remortage i can also get a better rate than my current 5%. Also would this effect my approval for a new mortgage. Thanks.

Account Closed · Answer

Can you qualify for both mortgages? The equity is not very high and you may lose some of it in the transaction costs anyways. If there is appreciation potential and the rent would cover your costs, you may as well keep it.

Matt Devincenzo · Answer

As a cash flow investment I'd definitely say it's a no-go.

You would be looking at a purely appreciation play, I personally don't have an issue with that it's not my cup of tea though. I would prefer to sell and use the equity to invest in a true cash flowing rental.

Look around here at the 50% "rule of thumb" if you do decide to ren. Understand that you will be putting money into that property while you rent it, and that you will be in a negative position as far as DTI goes when you try to qualify for any additional loans.

Kelly N. · Answer

Hi Kristin,

Those numbers really make me think you should sell.  If your townhome is vacant, or if any repair is ever needed, you are in the red.    And it doesn't appear that you've covered insurance for the property.

Check out the 50% rule (in the landlord forum) and you will see what most of us are shooting for- half the rent to cover the insurance, maintenance, those types of expenses.  The other half is to pay the principal and interest, and to pay you.  Most like to see 1-2% of the purchase price of a home in rent.

If you are interested in being  a landlord, consider looking to purchase a multifamily property, you can live in one unit while other pay for your mortgage!

Hope that helps,
Kelly

Kristin Kiley · Answer

HV:  210,000
Current loan:  160,000 ????@ 5%
Mortage payment w taxes n assoc fee  1490
Plan to charge 1500 for rent
Looking as an investment

Matt Devincenzo · Answer

If you have never landlorded before the bank will not consider the income for your qualification on a new mortgage, so if you can still qualify without that then maybe that is ok.

It's hard to say without numbers. What is the home's value, mortgage payment and what is the potential rent?