I have a house in New Orleans that I’m trying to determine if I should sell or rent. I have bought and sold a few personal houses but I have never rented out a property. Needless to say, I’m interested in have multiple rentals
Numbers:
purchased it for 530k in 2018
Currently worth 580k
I owe 390k
I could rent it for 3500k
Interest rate on the house is 2.75% fixed for 30years
Mortgage with escrow is 2700 per month
Should I rent it or sell? If I rent it, I’m going to cash out refinance the max.
@Jacob Souers I would sell it. Run the numbers on the cashout refi, and you will see that you may be cash flow negative on this house.
Unless you lie about you residency, the max LTV on a cashout would be 75%, which puts you with a mortgage of $435k (getting only $45k in cash), non-owner occupant properties have higher interest rates, so you likely in the 3.75-4% range for 30yr. That puts your P&I payment at $2000-2100, leaving $1400-1500 for taxes, insurance, repairs, capex, vacancy, and cashflow. My guess is that will leave you very little for cashflow.
If you sell it, you will net around $135k to move into other properties. Assuming your moving the money into multifamily (2-4 unit) properties, your buying power is $528k, but on properties that will cash flow much better than an expensive single family.
I’d probably sell any property in a market that has only gone up 10% in the last 3 years. Last report I saw said the national average was 16% in the last 12 months.
Is there value in just keeping it because you already have the asset? I don’t want to pay 6% on closing. I don’t need the money, I would end up reinvesting it in rental property. My investment is going to be in the same general area New Orleans or south Mississippi on the coast.
No. There’s a psychological bias for that I just don’t know the name of it. It involves thinking something you already own is worth more than the equivalent item you don’t own. If you wouldn’t buy the identical house for a rental don’t keep the one you already own. Paying $20k to sell will suck but at least you’ll save the capital gains tax.
You could try Zillow open door offerpad. See what they offer.
@Jacob Souers I would sell it. Run the numbers on the cashout refi, and you will see that you may be cash flow negative on this house.
Unless you lie about you residency, the max LTV on a cashout would be 75%, which puts you with a mortgage of $435k (getting only $45k in cash), non-owner occupant properties have higher interest rates, so you likely in the 3.75-4% range for 30yr. That puts your P&I payment at $2000-2100, leaving $1400-1500 for taxes, insurance, repairs, capex, vacancy, and cashflow. My guess is that will leave you very little for cashflow.
If you sell it, you will net around $135k to move into other properties. Assuming your moving the money into multifamily (2-4 unit) properties, your buying power is $528k, but on properties that will cash flow much better than an expensive single family.
This house is still our primary residence until may of 2022. I got a quote for a cash out refinance at 2.5% for 5600 in closing cost for a 30year fixed. My company that is relocating me is giving me 7% of the estimate value ~30k after taxes for moving cost. Note this benefit is only for closing cost. If I can get out 55k with the cash out refinance, I would only have ~25k of my original money in the deal. Base on loan pay off and 1% appreciation (very low based on historical) my roi would be 50% and I would have a 580k asset in my name.
It’s just hard to give that up. It’s in lakeshore and I really think the area is going up in value.