Should I Sell or Rent?

[Joel Parker]

Hello everyone. I will be moving out of my personal home in another year in order to avoid capital gains tax if I decide to sell the property after the two year window. I am currently trying to decide if I should sell it at the end of my two of years living in it or rent it out. Anyone have any thoughts? I am in the Tulsa, OK area. I bought the house for $130,000 and after I'm done with the remodels it will be worth around $190,000. For this type of house the rent in the area is going for about $1300-$1500 a month. Should I rent it out or sell and use the money I make to buy another home/possible rental houses? Thanks for any help!

[Evan Polaski]

@Joel Parker, the gross rent amount is sort of meaningless on its own.  You are making an investment decision now.  

What is your outstanding mortgage on the property?  What is the monthly cash output for that mortgage?  Are you going manage the rental yourself or hire out?  

The sell rent decision is multifaceted, but basically what will your net from the sale and can you reinvest that elsewhere to make more money? If you rent, what is your free cash flow each month, after accounting for PITI, reserves, management (or your time), etc. Will you be cashflow positive or negative? If negative, then sell. If positive, what's your return on equity? And compare that to the sell option and your ability to generate return on the proceeds from sale.