Rent or Sell?

[Josh Sturniolo]

Hey Everyone,

I am interested to hear your perspectives on whether you think selling or renting my property would be the more prudent option. The context is, I am in the military and moving in a couple months. I used a VA loan and put 0% down. If anyone has suggestions on framing how I should look at this decision, that would be helpful. One suggestion I've heard is to look at return on equity from renting it or keeping it. See below for the numbers:

Home Market Value: ~525k

Loan Balance: ~476k

Equity: ~50k

Mortgage Payment: $2570

Rent Price: $2650

Property Manager: 10% (potentially 7% w/military discount from a referral I got)

Cashflow: $-185/month, $-2,220/yr

1st year Equity Payoff from tenant: $11,561

It's a 4 bed, 3.5 bath home built in 2011 that only requires some new paint to be rent ready. I have a friend who is an agent that is looking to assume my VA loan and buy the house off market, so that I can avoid paying fees and commissions. Pros to this are I could sell with more money in my pocket than I could listing it, cons are that I lose my VA entitlement for 2 years, which to me isn't a huge deal, as I don't have enough entitlement left to buy house at my next duty station anyway.

Thanks, and Happy Memorial Day!

[JD Martin]

That's a really low rent to value price. You will probably be better off selling and taking your gains. Yes, if you've been there at least 2 years you won't pay any capital gains. I'm a veteran and I don't think you are right on your thinking here letting the agent assume your loan. Until the loan is paid off, you're not going to have any entitlement. Also, if the new buyer defaults on the loan you'll lose your entitlement forever unless you (or someone) pays the government back whatever they paid on your behalf. So I would think pretty hard on letting someone else assume your mortgage. You could be in a spot where you won't qualify for VA financing at all going forward.

Read the rules & eligibility here: https://www.benefits.va.gov/homeloans/faq_eligibility.asp