65% equity in current home, moving no matter what, RENT or SELL?

Question

Hi all,

I currently have 65% equity on my current home, my wife and I are buying a new home (closing tomorrow actually) and haven't seen much traction on selling our current house, been on the market for 3wks now and no offers. The house is in the Houston area 12min from downtown and homes are expensive to purchase, but the rent rates I'm seeing aren't near 1% purchase value, nearer 0.5% actually.

Knowing that we are heavy on equity in the home, and have a (in todays numbers) great interest rate of 2.3% on the loan, what is the consensus on selling vs renting?

(we are purchasing a new house regardless of what happens with this one.)

Eliott Elias · Answer

Sell if via owner finance. Pull the cash out, BRRRR it, and collect a down payment from another buyer.

Michael Dumler · Answer

@Jacob Lehner, since you don't need the equity for any immediate purposes then I advise keeping the property as a rental. I don't have a crystal ball, but when rates drop X years from now, refinance to lock in a new rate and pull your capital back out. The question becomes, what would you do with the capital if you sold or refinanced now? If the proceeds are going straight to your savings account, then I advise keeping your money parked in real estate. Moreover, if you have a great deal in front of you that you'd like to acquire then sell your current home to finance the next purchase.

Account Closed · Answer

I would do a cash out refi and rent it. If you need help with a cash out refi or a mortgage for the new house please send me a message I can help you with both

Josh Young · Answer

If you don’t need the cash and don’t have a different investment to put it in I’d definitely keep it as a long term rental as long as it will cash flow and I’m sure it will with that equity and interest rate. Run a quick calculation of return on equity, this will let know the real return for the decision you are making, it’s (cash flow + principal portion of mortgage payment) divided by equity, plus you can anticipate some appreciation over the long run. If the return on equity is less than 10% you may consider selling or refinancing, or you might want to take out a 2nd loan on the property while it’s still your primary, but again it depends on what you are going to do with that money. I like managing rental properties, but if you don’t you can find a property manager for 8% of rent (some will have a smaller advertised fee but will charge you extra fees to get to that 8%). I’ve done this and kept as a long term rental a couple times and has worked out very well. I hope this helps, good luck!

V.G Jason · Answer

If you got a 2.3% interest rate, and the housing market is kind of flat, don't cash out re-fi. 65% equity is great, keep it, and let it grow some at that 2.3%.

To answer your question, we need to more about your personal finances? Are you in financial crunch, are you able to withstand possibly negative cash flow for a short period of time(1-3 years), etc.?

If you have a comfortable nest egg for your personal funds, and a little nest egg for this house. I'd definitely rent it. If you are crunched financially, I would look to price it to sell. If you're in between, I'd hold and rent it.

Jacob Lehner · Answer

would you be able to explain that process to me? i'm very new to anything other than just straight up purchasing a home. thanks!

Jacob Lehner · Answer

Hi Chris, Air BNB has been a thought. this would be our first rental.

The house is pratty good condition. maybe some caulking in the corners, but other than that it's a solid house. we would need to keep it furnished, which isnt the worst thing but its more money out right after we close on a new house. just tough to swallow, although manageable.

Jared Hottle · Answer

With that interest rate I would certainly take a second look at keeping the property. I like Chris' idea of possible Airbnb. Maybe do a bit of research in that and see what you come up with.

Taj Akinbode · Answer

Hi Jacob,

I'm sorry to hear that your current home isn't getting the traction you had hoped for on the market. With 65% equity and a low interest rate of 2.3%, it's understandable that you're considering both selling and renting options. The equity you have in your home and the favorable interest rate on your loan are both huge advantages.

Here are three ideas to potentially help you make a decision:

• Look into the real estate market trends in the subdivision and immediate area where your property is located in Houston, including average days on market and rental rate vs. sales prices of comparable. This can help you determine if renting is a viable option and if it's worth it to wait for a sale. I can help you pull this data
• Consider hiring a professional Realtor like myself to help you market your property, get more eyes on it and find potential buyers. A good Realtor can help you maximize the exposure of your home and negotiate a great deal.
• Really reassess your personal financial goals and timeline. Are you looking to sell quickly and move on, or do you have the ability to wait for a better sale price or hold onto the property as a rental?

If you'd like to explore these ideas in more detail and better narrow down to a few good solutions for your situation, please feel free to schedule a time with me via the link in my signature. I'm here to help and would love to connect with you.

65% equity in current home, moving no matter what, RENT or SELL?

65% equity in current home, moving no matter what, RENT or SELL?

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