What to do with current house? Investor Advice Appreciated

Question

Hi Everyone,

My wife and I are currently living in Raleigh NC. We own 100% of our home in Raleigh. We are actively looking into moving to Charlotte with the intention of buying another home to live in for a year or two and then use that as an STR, once we save enough to purchase another home.

Any advice on what is the smartest thing to do with our existing home in Raleigh? Do we sell and take the cash? Long term rental? STR?

Any and all advice is greatly appreciated.

Chad Gray · Answer

A lot of good replies here so far, however I don't think there is necessarily a "smartest" option as a lot of it is contingent on your current goals and what you're looking to get out of the property. One thing that hasn't been pointed out is that the property has to be your primary residence for 2 out of the previous 5 years prior to selling in order to avoid capital gains. So, if you did turn it into a rental, if you were to sell after the end of year 3, you would now owe capital gains on the profit of the sale. (I'm not a CPA this is not financial advice). If you don't need the equity out of it at the moment, converting into a rental for cash flow and appreciation wouldn't be a bad idea, however I would be cognizant of the potential tax implications.

Pat Lulewicz · Answer

As others have said, this entirely depends on location and your personal liquidity needs. If building a portfolio if your goal and liquidity isn't a concern with your next purchase, I would never sell an asset in Raleigh unless you need to.

Putting an LTR in there is your lowest touch option and you could likely manage it effectively from Charlotte. Shorter-lease unfurnished rentals are another option (and still self manage); we get a lot of those individuals who either just moved here or are between homes and you can get good premiums on those rents.

If you have the capital, furnishing it and renting it as a MTR/STR is definitely going to be your highest $$ return...we manage 6 of these types of properties in the Triangle and there's great demand for them. If you need some guidance on the furnishing aspect, we've done the design/furnishing (white glove: order it, build it, etc) of 2 in the past year so can give you some ideas.

Benjamin Carver · Answer

Hey Brett, I do STR and work with investors here in Raleigh. It HIGHLY depends on the location, house features, and what your actual goals are. I'm going to send you guys a PM, if you want to chat more about what it would look like to rent it out different ways

Christine Mulkins · Answer

You could keep the home, do a cash out refi to access some cash to purchase more rentals and rent your existing home out as a long-term rental. The goal would be to put just enough debt on it so that you still cash flow nicely after you're getting rent and paying any necessary expenses. Because you're very familiar with the home and lived in the area, you can very likely manage the place on your own without needing to hire a PM, thus putting more money in your pocket. This is just an idea to scale your rental property portfolio. Of course, not having the financials on the possible rents and new mortgage if you refi'd makes it hard to analyze properly, but this is just an idea to consider :)

Brett Hushon · Answer

@Chris Seveney thanks for the advice. I've been kicking the idea around. At this point I'm between LTR and selling. I don't necessarily need the cash but could open up more cash for more investments quicker. Our end goal is to acquire several properties for STR investments

Chris Seveney · Answer

IF you go STR, do you want another job? That is something to consider, LTR is not as time consuming but would still recommend a PM. If it were me and I owned it outright I would keep it as a rental but thats me. IF you need the cash for a new home you could sell it or take a loan out on it for your down payment - up to you but that is what I would do (keep it as LTR and not take any leverage against it that way I always can easily sell or take $ later on)