Should I rent or sell property?

Question

Hi all,

I just purchased my first property for $125,000.  My note is currently for $118,500.  The ARV of this property is $190,000, and I am currently doing the renovations.  Rehab cost abot $10,000.

This property would cash flow nicely with market rent at $1,500/month. I have about $40,000 in student loans that I would like to pay off.  I have 3 options that I am considering with this property.

Option 1: Rent this property out after renovations at the current note balance

Option 2: Cash out re-finance to pay off student debt and still rent out property but at a thinner margin

Option 3: Sell house and use profits to pay off debt and look for next deal

What do you guys think?  I'm also open to other options, but those are the ones that I have thought of.

Brie Schmidt · Answer

@Andrew Tuquilar - personally I would do option 3.  I think you can find much better cash flow that that on other properties.  Plus paying off your student loans will help clear some of your DTI and will make it easier for you to get more loans in the future.

Matthew Paul · Answer

I would get rid of that student loan in a heartbeat . And move forward hard and fast .

Cal C. · Answer

I totally agree!

Andrew Martel · Answer

The question I always ask myself is "where is the highest percentage". If your ROI % is higher than your student loan, then stick with that.  The other question I ask myself when paying down a loan (if i'm paying principal), is "can this money have a higher yield if used somewhere else". I then go from there.  If i can afford the loan payment, and my money can make more money elsewhere than what the interest on the loan costs me, then I use that opportunity to invest elsewhere... keeping the debt. If not, then I pay on the debt.

Personally I hate debt, and when i had "bad" debt, i worked really hard to get out of it as quickly as possible. This however was debt at a high percentage rate that I didn't feel I could beat elsewhere.

My 2 cents..

Elizabeth Colegrove · Answer

Honestly it truly depends on your "plan". My brother just got accepted into Cornelll. My plan for him is to find a house that he can rent out the rooms to pay his board. That needs work that he can do around his studies )sweat equity). When he's finished he can rent it out using the difference (after enough has been saved for an oh shit fund) to pay his student loan amount each month.

Again your "plan" is important. My husband and I had the option to sell our first house for a 30k profit or a rental profit of $220 a month. Although many would probably think we were crazy, we are happy we kept it. Tenants pay or mortgage down, we gain cash flow as the rent amount rise. The house continues to appreciate.

Should I rent or sell property?

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