Ryan, thanks so much for your detailed response. I didn't realize you posted right away since I didn't have notifications enabled. Here are some more details to the clarifying questions you asked:
How far away will your new house be? Within 30-40 minutes.
Are you planning on managing this property yourself? Yes. Since this would be our first rental we'd like to give management a try before we decide if we are up for the job or not.
Do you make enough monthly income to cover your new mortgage and your current mortgage and still have enough to cover your bills? Yes, but this would not be an ideal situation since we're fairly conservative with our finances.
Is 800 your current insurance rate or is that an estimate for a landlord policy because usually they are significantly different. This is a current rate for a home owners policy. There are some additional discounts for having auto insurance with the same company but I didn't include those.
What does the HOA cover? You said that you were expecting to get a new roof for 5K. Isn't that covered in the HOA? The HOA covers lawn care and garbage removal. We actually own the land and building structure so we are responsible for all repairs.
How hot is the rental market in that area? I don't think it's that great, but I don't really have any experience to base that on. $2200 would be at the high end of the market. $1900 or $2000 /month would be much more likely based on other rentals in the neighborhood.
Option 1 seems like the lower risk option and the way we are leaning if we keep the property. But we are just unsure if we should keep it at all.
Option 2 seems a bit risky since we will most likely be cash flow negative for about 10 years. Also, how did you calculate a positive cash flow if we stay with the 15 year mortgage? Here is what I calculated as our current monthly expenses: Principle + Interest= $1450, Property Tax=$475, Insurance=$67, HOA=125, Water/Sewer(Fixed cost even if we use no water)=110 Total = $2227 and then I have to add on maintenance costs and vacancy as well.
Since we bought the property in 2008 without having any real estate experience we seriously overpaid for it at the peak of the market. When I work out the numbers, especially for option 2, this seems to be a pretty bad property to keep as a rental in terms to cash flow. I'm just hesitating to sell it because of the cost and hassle of selling a property. I guess we shouldn't look at what losses we have already had on the property since they are sunk costs, and just look at the property as if we we buying it today.
What I'm really looking to understand is if a savvy real estate investor would even consider this as a viable investment property with our current numbers (staying with current mortgage or a 30 year refi). Or would you they look at all the expenses and run for the hills and sell?
Thanks again for all your insights!
