Rent or sell

3 Replies

I have 11 years left on 15 year mortgage of primary residence turned rental. PITI is 1,500. Potential rent is 1,600-1,800. After I factor in capx, vacancy, etc. I'm negative cash flow. But factoring in tax savings and principal pay down at a nice click w only 11 yrs left on mortgage I like the idea of holding onto it as rental and becoming very nice passive income in 11 years. I'm torn on whether I should: 1. rent as is 2. Refi into 20 or 30 yr to rent w positive cash flow 3. sell and put funds into A. Pay down of primary residence (recently purchased larger home as I sent from family of 4 to 6 and needed more room) ...or B. Funds into savings and investments Other allocable info... Neighborhood is in fast growing area....great schools, parks, low taxes, etc. n'hood is on the more affordable end of county and city. If I sold today I'd likely net 65-75k after commission, mortgage pay off but before taxes. Lived in this house as primary residence for 3+ years before moving out less than year ago (needed bigger house w growing family) and currently renting the house to family which plans to buy their own house 6-12 months from now. Would appreciate any and all thoughts

Negative cash flow vs $65k-$75k?? I'd definitely sell it. Not only are you negative cash flow but any major repair, bad tenant or vacancy is going to dig you deeper. Then I'd take the money and put it toward a better investment.

I like the idea of doing the refi to create positive cash flow. With the option of that refi today, while rates are still low, to me negative cash flow is off the table. That 65k could also go a long way into a new investment that could give you higher ROI, but that will require work to find, close, and manage that new property. You could combine the two strategies with a cash-out refi to get some cash but keep it in positive cash-flow. Without more details about the property, the market, and your long-term goals, it's hard to say what the best option for you is.

I say refi into 30 year with today's rates then get a home equity line to use for other investments. With a HELOC you only pay interest on what you use and typically the appraisal is covered by the lender. With it being non-owner occupied and assuming your DTI can cover the proposed new debt (which really shouldn't be a problem considering the rental income and the amazing new cash flow) I suspect you'll be able to get a 70% LTV line on it which can be used for capital improvements and/or new investments. I know Wells offers a HELOC that grows annually as values increase and principle decreases. 4% ish is cheap money man. In 10 or 20 years that house will be worth way more with usable equity, a fixed low rate and rents will have increased.

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