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Updated over 2 years ago on . Most recent reply

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Clinton Cox
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Relocating for work. Should I sell my home or rent it out?

Clinton Cox
Posted

Hi everyone! I'm new to the group and new to real-estate investing. I've been researching the better part of the last year and getting ready to make a move soon. My goal is to build a portfolio of rental properties and eventually even hotels. I've been in the hotel business for 17 years helping others build wealth and now I want to get in the game! I recently accepted an offer for a new job, which requires a relocation from Miami to South Dakota! I currently own my house (this was my first home purchase). I have an FHA mortgage with a nice interest rate of 3.125%. I've owned the single-family home for about three years now (it's also three years old, as I bought it as a new-construction home). I have about $200,000 in equity in the home already (95% through appreciation). Should I sell it and use the equity to begin buying rental properties? Or should I hold onto the home and rent it out as my first rental home? I realize that to answer this question specifically depends on many variables. However, in general for those of you out there who have been doing this a while what do you think? From my research I believe the property can cash-flow $200 to $400 per month after all expenses, mortgage and vacancy, CapEx, maintenance. Lastly, the home is not near the beach -- it's in a suburb and STRs aren't allowed so if I keep it, it will be long-term rental only.

Thanks all!  Either way I'm excited about the potential; and this job change has given me a chance to get started in my real-estate career a bit sooner than I anticipated!  

  • Clinton Cox
  • Most Popular Reply

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    Cory J Thornton
    • Real Estate Agent
    • Raleigh, NC
    282
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    Cory J Thornton
    • Real Estate Agent
    • Raleigh, NC
    Replied

    @Clinton Cox - Congratulations on the new job and on taking the plunge into Real Estate Investing! Any thoughts that I have below I would treat as bread crumbs, then verify them with your CPA or a local pro to ensure that it holds true to your scenario. 

    Here are a few things that came to mind when reading your post: 

    1) There are few times in life where you can make a profit without the government stealing a chunk of it. When you sell a primary residence, as long as some basic parameters are met, the government does not tax your gains. If you convert the property to a rental home, then go to sell it after a few years, it will likely be subject to capital gains taxes. My wife and I have done three "live in flips" over the past 10 years and each time, it leapfrogs our balance sheet because we jump ahead and don't lose the gain to taxes. 

    2) Is there a chance with the new job that you could be transferred back to FLA or is there a chance you want a path back to FLA in case you don't end up liking SD? I don't know much about South Dakota, but if you are  FLA native, then Miami to SD could be a real culture/ temperature shock. 

    3) I don't remember who said this first, but I have heard it several places (Jason Hartman, Robert Kiyosaki, ...)  Right now with CPI at this level, cheap debt is very much like an asset. If the CPI is 8% and your loan is at 3% then the time value of money kicks in and the government is depreciating the value of your debt with the 5% delta between those two numbers. 

    4) One thing that may help is to figure out the ROI you will most likely get converting your home to a long term rental. Do some due diligence on the market where you are moving, and see what kinds of returns can be expected in that market.

    5) This could be a house hack opportunity for you. Not being a native of the area, you may not find the exact right area for you on the first try. It may be worth considering finding a house hack (if it works for your family situation), and do that for a year. Then, once you know the area and are established in the new job, buy your home, and lease out your property. 

    Having equity and a low interest rate means you have the blessing of options ... it will all come down to which strategies you think will be the highest value as you consider your goals. 

    Congratulations again on the new job ... keep us posted on your investing journey! 

    • Cory J Thornton

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