Help, I am newer, should I rent my house or sell it?

Question

I have a house that I don’t live in, I am renting out now, but I’m trying to decide if it’s better to keep it as a rental or sell it, my plan in the future is buy houses and rent them out, I’m unsure what’s best to do with this house please guide me is there a book or any suggestions will be appreciated. More details down

House loan- $140,000

House appraisal-$250.000

Monthly Rent- $1400

House payment w taxis and insurance $1100 Monthly

Thank you

House loan- $140,000

House appraisal-$250.000

Monthly Rent- $1400

House payment w taxis and insurance $1100 Monthly

Thank you

Dillon Dale · Answer

@Maria Flores as others have said, after maintenance and other expenses you might not be cash flowing. With that much equity, I would sell and invest in something that would cash flow better!

Maria Flores · Answer

@Jody Sperling thank you for your answer helps a lot.

Jeremy Wirths · Answer

I second what @Jody Sperling said. Keep it, keep the cash flow coming in, and use the HELOC for the next.

Todd Rasmussen · Answer

@Maria Flores

If you have 25% additional expenses, the property will be cash flow negative. Is it really making any money? I would not pull equity out as the added debt service will decrease your margin even further. I think the only sustainable way to tap equity would be to sell.

If you've lived in the home recently and long enough, you might be eligible for a step up in your basis to offset capital gains.

Basit Siddiqi · Answer

@Maria FloresIf your goal is to buy houses and rent them out why would you sell the house?If you sell a house and then buy a new house - you are stuck with transactional costs - seller commission on the sale, a bunch of title work, loan processing fees, etc>You may be required to pay taxes unless you use a deferment strategy like a 1031.I would only sell the house if you think it is a bad investment and you can find a better one.If you can do a 75% LTV, you may be eligible to pull out $47,500($250,000 x 75% - $140,000)

Good luck!

Theresa Harris · Answer

Talk to an accountant (there is a thread on BP one hosts and it says to ask them anything). As it was your primary residence and now a rental, there is a set period of time (guessing you are in the US) where you can sell it and the tax implications are different. If you are in Canada, that doesn't apply as the CRA takes any capital gains and factors in how long you lived there vs renting it and adjusts accordingly.

If the house has appreciated $110K and you were to sell, how much would you make from the new rental house (or houses)? Could you buy a duplex or a place with a suite?

Jody Sperling · Answer

If you recently received an official appraisal at 250k, take that to a local bank, any local bank (so not the Wells Fargos and US Banks of the world but the smaller banks local to your city) and ask them for a first-position HELOC on the property.

A Home Equity Line Of Credit will cost you $1500 at most in setup fees and closing costs; the local bank will buy out the remainder of your 140k loan and give you access to between 75 and 90% of the LTV.

Once the new HELOC is set up, if the only thing you do is apply rent payments to it each month, the mortgage will begin going down rapidly. You'll notice that it's like an infusion into your cashflow because you'll no longer have a "house payment" on it, and you'll have access to around 55k of cash you previously didn't have access to, enabling you to buy another rental, if it fits with your current financial goals.

Best of luck! You're in an envious position with that appreciation.

Help, I am newer, should I rent my house or sell it?

Help, I am newer, should I rent my house or sell it?

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