Do I sell or rent out my first home?

Question

Im 24 and looking to change my future. Im going to be moving but i cant figure out if i should sell my home (which is my first home) or rent it out. After i lose my homestead to rent it out the morgage will be about 1815.44 a month including taxes/escrow, intrest, payment.

I purchased this home at 198,500.00 it is now valued at 232,000 minimum and i owe 186,668.73 remaining on the home.

In short is it best to sell this 2 year old home thats in a developing neighborhood or should I create my first rental with this home?

Taylor Dasch · Answer

I kind of had a similar situation with my first home - but I lived in it for 4 years. For me I chose to keep it for emotional reasons because Its still the nicest property I have lol. So I have rented it out for the last 3 years. To me, it depends on what your goals are.  I would keep it as a rental for as long as possible. Then when it has appreciated more, you can choose to cash out refinance or sell it. Will it cash flow right now? If not I would probably sell it or stay in it ideally. You will probably have to write your own thoughts on a piece of paper as well as the pros and cons of both scenarios. This can help you a lot! Be sure to have a long term vision for yourself.

Alex Guerrero · Answer

Appreciate you responding- Would you still stand by that after my last response?

Alex Guerrero · Answer

Just replied below!

Alex Guerrero · Answer

I spoke with the tax office in my area and they let me know once the home becomes a rental property the homestead will be taken off and that will boost the monthly payment to 1815 a month. Now i have a close family member who is willing to pay 1800 in rent so that is not much cash flow but is worth thinking about if theres a benefit of biting the bullet here on -$15 a month to get the money back on the home that they will be paying on it. The value of my home has gone up insanely from the buying date of the first owner of 152,800 in 2018 to 194,200 in 2020 when i purchased it, to 236,600 as of today (all according to zillow). This makes me wonder if its worth holding onto in hopes of my home value continuing its trend and selling if payments become unbearable...

And i love the pros and cons idea, the goal is financial freedom forsure i know my first move is one of the most important moves so i really want to be wise here...

Bill B. · Answer

You’ve only got about $33k in appreciation and you’re going to pay $15k or more of that to sell. So the tax free sale today isn’t a foregone conclusion. If you’re moving out of state I insta-sell.  It’s only gone up about 12% in two years so it’s not in a high growth area and you probably won’t find a bigger sellers market than next month.