Should I sell or rent out my property? Need serious advice!

Buying & Selling Real Estate
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Should I sell or rent out my property? Need serious advice!

Lauren Samford
Property Manager · Member since 2023 · 20 posts · 10 votes

I bought my house 5 years ago with the intent to live in it for a few years and then turn it into an STR. Unfortunately, recent regulations have made it so that I can no longer STR in my neighborhood. I have about $250k in equity in the home and my realtor believes if we list it we will probably get a bidding war in this market and since our neighborhood is highly desirable. If I LTR it will cash flow $300-500 per month, which isn't bad but I want to get much more serious with STR investments in our market (I started an LLC for Airbnb arbitrage and just no bites yet). I could mid-term rent my house, which would cash flow more like $1k per month but there's more potential for vacancies. If I sell, I could use the cash from the sale of this home to get my business really going and even buy multiple STR permissable properties. On the other hand, I am locked in at a 3% interest rate on a home that will likely continue to appreciate well. Not a bad predicament to be in but I feel like I'm in analysis paralysis... what should I do?!?!? I am inclined to sell because I feel like I'm sitting on cash and I do not like the idea of taking out a HELOC or other loans to continue my investing journey (I got debt free in 2022 except for the mortgage).

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Lucia Rushton
Realtor · Dallas - Fort Worth Metroplex, TX · Member since 2016 · 1k+ posts · 925 votes
3y

@Lauren Samford something to think about, I would not bank on buying properties for STR as many cities or HOAs are changing their guidelines and with little notice. Putting all your eggs in one basket to me is Investir suicide. But totally my opinion.

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  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    3y

    Real estate is about leveraging.  
    You need to decide on your personal Risk/Reward dynamics.  If you don’t want to leverage your house then you need to save more cash.  Keep in mind your house is still exposed.

    You need to run the numbers.  No one has an answer.   It’s about the numbers.

    Looks like you’re in property management?  Then you should be living and investing in a multi family depending on your family life.  

    0Reply
  • Marc Bacchi
    Member since 2023 · 3 posts · 3 votes
    3y

    I don't have an answer for you, just wanted to say I am in almost the exact same predicament.  Primary home, @ 200k equity, 2.8 % locked, want to use equity to begin real investing.  

    Not sure if I should sell and lose the awesome interest rate, or rent to get about $700/mo cash flow from this one property.  Analysis paralysis, natural aversion to risk, but want to break myself of that cage.

    I also try to always do everything on my own, no mentors, help, partners, etc, so that has also held me back.  I think looking to get face-time with someone who is experienced in this specific situation and market status would be really helpful to answer some internal questions and provide guidance and external motivation to make a decision and get moving. 

    Good luck whatever you choose!

    1Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y

    One other thing to consider is tax implications if you sell.  You have a lower interest rate on the mortgage, but if you turn it into a rental and sell it in 5 years, you will have to pay capital gains tax.  If you sell it now (or in the next 2 years), you won't.  When estimating cash flow, don't forget to account for vacancies.  Eg if doing a short term rental, don't assume it will be rented all of the time.

    What do the numbers look like if you took that money and bought a home as a rental?

    2Reply
  • Lucia Rushton
    Realtor · Dallas - Fort Worth Metroplex, TX · Member since 2016 · 1k+ posts · 925 votes
    3y

    @Lauren Samford something to think about, I would not bank on buying properties for STR as many cities or HOAs are changing their guidelines and with little notice. Putting all your eggs in one basket to me is Investir suicide. But totally my opinion.

    2Reply
  • Elvise AtemPro Member
    Member since 2023 · 23 posts · 16 votes
    3y

    Hey there, I love your predicament because I am currently facing a similar situation, but I will offer my thought and what is motivating my decision. hopefully this could be helpful.

    we bought during the pandemic and locked in 2.25% rate. last thing I want to do is mess this rate. now with appreciation of almost $200,000 I am wondering what to do especially having created a new llc to focus on STR, flips,BRRRR and home maintenance.

    in taking this decision I believe you should consider location, which I think from your writeup suggest it's a strong area in terms of appreciation. next question is what market are you looking to invest in STR? I think you equally partially answered that question, telling the difficulties you are facing with STR regulations.

    this is my prescription and what I have decided to do .

    consider HELOC your current property, use the money to

    1- add some value to your current home if room provide ( not to exceed X $ amount) you can then rent out the extra created meat to help pay HELOC

    2- Use the balance of HELOC to purchase another home in an appreciating market and if possible one that allows STR. use cash flow from new property still towards HELOC and just allow second home appreciate OR if you can fine a fixer upper to do BRRRR tat will even be better.

    that is what I have resolved to to. you can get back to me at 301-256-1578 so we can continue to brainstorm.

    little cent

    1Reply
  • Elvise AtemPro Member
    Member since 2023 · 23 posts · 16 votes
    3y

    Hey there, I love your predicament because I am currently facing a similar situation, but I will offer my thought and what is motivating my decision. hopefully this could be helpful.

    we bought during the pandemic and locked in 2.25% rate. last thing I want to do is mess this rate. now with appreciation of almost $200,000 I am wondering what to do especially having created a new llc to focus on STR, flips,BRRRR and home maintenance.

    in taking this decision I believe you should consider location, which I think from your writeup suggest it's a strong area in terms of appreciation. next question is what market are you looking to invest in STR? I think you equally partially answered that question, telling the difficulties you are facing with STR regulations.

    this is my prescription and what I have decided to do .

    consider HELOC your current property, use the money to

    1- add some value to your current home if room provide ( not to exceed X $ amount) you can then rent out the extra created meat to help pay HELOC

    2- Use the balance of HELOC to purchase another home in an appreciating market and if possible one that allows STR. use cash flow from new property still towards HELOC and just allow second home appreciate OR if you can fine a fixer upper to do BRRRR tat will even be better.

    that is what I have resolved to to. you can get back to me at 301-256-1578 so we can continue to brainstorm.

    little cent

    1Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    3y

    @Lauren Samford rent and leverage! Trust me :)

    1Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    3y

    @Marc Bacchi rent!

    0Reply
  • Lauren Samford
    OP
    Property Manager · Member since 2023 · 20 posts · 10 votes
    3y
    Quote from @Marc Bacchi:

    I don't have an answer for you, just wanted to say I am in almost the exact same predicament.  Primary home, @ 200k equity, 2.8 % locked, want to use equity to begin real investing.  

    Not sure if I should sell and lose the awesome interest rate, or rent to get about $700/mo cash flow from this one property.  Analysis paralysis, natural aversion to risk, but want to break myself of that cage.

    I also try to always do everything on my own, no mentors, help, partners, etc, so that has also held me back.  I think looking to get face-time with someone who is experienced in this specific situation and market status would be really helpful to answer some internal questions and provide guidance and external motivation to make a decision and get moving. 

    Good luck whatever you choose!


    Not a bad decision but just an update: we decided to rent it out Mid Term Rental. So surprised by the level of interest and how much we could charge for rent! Now we have a cash cow we can use for our next investment. The deciding factor was talking to a neighbor who bought his house for $140k in 1994 and now it’s worth $640k. He said never in his wildest dreams would he have thought in 30 years his property would be worth that much. So that made me decide to keep it and see how much it appreciates. Good luck to you as well!!  

    1Reply
  • Lauren Samford
    OP
    Property Manager · Member since 2023 · 20 posts · 10 votes
    3y
    Quote from @Elvise Atem:

    Hey there, I love your predicament because I am currently facing a similar situation, but I will offer my thought and what is motivating my decision. hopefully this could be helpful.

    we bought during the pandemic and locked in 2.25% rate. last thing I want to do is mess this rate. now with appreciation of almost $200,000 I am wondering what to do especially having created a new llc to focus on STR, flips,BRRRR and home maintenance.

    in taking this decision I believe you should consider location, which I think from your writeup suggest it's a strong area in terms of appreciation. next question is what market are you looking to invest in STR? I think you equally partially answered that question, telling the difficulties you are facing with STR regulations.

    this is my prescription and what I have decided to do .

    consider HELOC your current property, use the money to

    1- add some value to your current home if room provide ( not to exceed X $ amount) you can then rent out the extra created meat to help pay HELOC

    2- Use the balance of HELOC to purchase another home in an appreciating market and if possible one that allows STR. use cash flow from new property still towards HELOC and just allow second home appreciate OR if you can fine a fixer upper to do BRRRR tat will even be better.

    that is what I have resolved to to. you can get back to me at 301-256-1578 so we can continue to brainstorm.

    little cent

    Thanks so much! Yes we decided to rent it out and apply for HELOC to use toward next investment property. Great advice! 
    1Reply
  • Marc Bacchi
    Member since 2023 · 3 posts · 3 votes
    3y
    Quote from @Lauren Samford:
    Quote from @Marc Bacchi:

    I don't have an answer for you, just wanted to say I am in almost the exact same predicament.  Primary home, @ 200k equity, 2.8 % locked, want to use equity to begin real investing.  

    Not sure if I should sell and lose the awesome interest rate, or rent to get about $700/mo cash flow from this one property.  Analysis paralysis, natural aversion to risk, but want to break myself of that cage.

    I also try to always do everything on my own, no mentors, help, partners, etc, so that has also held me back.  I think looking to get face-time with someone who is experienced in this specific situation and market status would be really helpful to answer some internal questions and provide guidance and external motivation to make a decision and get moving. 

    Good luck whatever you choose!


    Not a bad decision but just an update: we decided to rent it out Mid Term Rental. So surprised by the level of interest and how much we could charge for rent! Now we have a cash cow we can use for our next investment. The deciding factor was talking to a neighbor who bought his house for $140k in 1994 and now it’s worth $640k. He said never in his wildest dreams would he have thought in 30 years his property would be worth that much. So that made me decide to keep it and see how much it appreciates. Good luck to you as well!!  


    Excellent.

    I am thinking along the very same lines.  I'll probably be here for another year or two, but I'll keep the property when I do find my next step, and aim for Mid Term rental, to get the higher income.  Will also likely use a property manager to make it even easier, albeit a little less profit.

    Best wishes! 

    1Reply
  • Erin O'Connor Smith
    Los Angeles, CA · Member since 2017 · 75 posts · 24 votes
    3y

    Nice! I like "30-day stay" on audible.

    1Reply
  • Rick Albert
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    3y

    First of all, who cares what your interest rate is on a home? That shouldn't be a deciding factor because if the numbers work, the numbers work. I would have a rental with 10% interest if it still cash flowed and met my criteria.

    With that said, you sell what sounds like your personal residence and then where do you go? Into renting? That doesn't sound like a good idea.

    I also agree with what was mentioned before about STRs. More and more cities are creating regulations against this because they are short housing. I'm not saying don't do it, I'm saying be prepared.

    And lastly, is $250,000 enough to get you want you want? You could rent it out for a few years, still sell tax free (if you lived in it 2 of the last 5 years). Even if values stay the same, you still net more because of loan buy down. Later on you could scale up with a 1031 Exchange.

    0Reply
  • Lauren Samford
    OP
    Property Manager · Member since 2023 · 20 posts · 10 votes
    2y

    Just wanted to let everyone who responded know the latest update because I'm just PROUD and THANKFUL for this community. We decided to furnish and try MTR and WOW the demand was incredible, we cash flow well over $1500/mo! We moved into an apartment while we shopped for the next property, and we took out a HELOC and used for a DP on multi-family! So that one decision to rent gave us the leverage we needed to buy the next property and generate multiple streams of income. The next property may not cash flow as well in the beginning but the zoning and location is gold. I think over time buy & hold is the way to go, and I can't believe how far we've come in only 8 months! Thank you to everyone who weighed in and helped us get educated on leverage! Tax season will be telling now :) For anyone still on the fence, what did you decide and how did it work out for you?

    3Reply
  • Bonnie LowPro Member
    Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
    2y

    Congratulations, Lauren! You've done really well on that property. Not every property is suited to MTR or will cash flow that well but you're clearly in a great market and have a great product and that makes all the difference. 

    [email protected]
    1Reply
  • Marc Bacchi
    Member since 2023 · 3 posts · 3 votes
    2y

    Hey Lauren that's really great! Congrats on taking the steps and seeing the benefit already, that's a really good feeling I'm sure. 

    I haven't gotten that far myself, but I did just this week close on a HELOC so I'm ready when I find the right deal at this point.

    I guess at this point you just keep on moving forward, taking steps.

    1Reply
  • Lauren Samford
    OP
    Property Manager · Member since 2023 · 20 posts · 10 votes
    2y
    Quote from @Marc Bacchi:

    Hey Lauren that's really great! Congrats on taking the steps and seeing the benefit already, that's a really good feeling I'm sure. 

    I haven't gotten that far myself, but I did just this week close on a HELOC so I'm ready when I find the right deal at this point.

    I guess at this point you just keep on moving forward, taking steps.


     Keep your head up in your search! That's definitely the right first step! It took a while and was A LOT of paperwork but worth it to get into another property given we didn't have tons of capital. In speaking with fellow investors they agreed, if you're willing to owner occupy and the numbers work, it's a great way to get in without having a ton of capital. A lot of early investors do flips to build capital but we aren't ready for that yet. Now that we've closed I'm adjusting to having 3 mortgages and managing the operations/expenses... baby steps. 

    0Reply
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