I've recently purchased a new home due to my expanding family and I'm not sure whether to sell my current townhouse or rent it out. My HOA has no restrictions with renting and the property is in Midtown Houston.
It has two bedrooms 1.5 baths, my monthly payment is $1500/month which includes mortgage, hoa, and taxes. Two other units in my development are currently renting for $2100/month and $2500/month (similar sq/ft). I purchased the property in 2011for $198K, it's worth $275K, and I owe $143K.
As Charles said, if you don't need the money then enjoy the extra cashflow. Even if you needed some of the cash, consider refinancing instead and pulling out some of that equity. Nothing like starting now if you don't already have an investment property. That area will continue to grow.
That's great appreciation and looks like it will provide great cash flow for you. One thing you may also want to check into is the tax consequences when you do decide to sell this property. If it has been your primary residence for at least 2 of the last 5 years, you shouldn't have to pay any capital gains tax (consult your tax accountant).
The other thing that may be interesting is to calculate your returns on this property as a rental compared to the potential returns if you deployed your capital into other investments. You could also look at the potential of doing a cash out refi, to redeploy the excess capital (make sure the unit would still be cash flow property). Lots of options to consider and Midtown is a great location. Take your time and analyze all the angles and what is most important to you and your family.
Your goals, your current financial position and what you value most will help dictate what you should do. As an outsider, we all will have our opinions based on our personal biases and I would encourage you to explore all the available pros and cons of the multitude of strategies you could employ. Good luck with your decision.
@Ryan Stewart what are your goals? I think that would drive the decision on if you should cash out and use the money, do a refi, or rent it out.
Thank you very much, to all of you, for taking the time to respond. This would be my first rental, so obviously it's a bit intimidating going through the motions on even where to start with renting! Any suggestions on where to get more information? I don't necessarily need the money, I've already put 20% down on the new property, and if all goes we should be closing in a few weeks.
My goals would fall in line with renting the property, it's getting over the hurdle of actually taking that step. I would like to hang on to this property as it does appear to have good cash flow.
Tony - I was definitely thinking about the capital gains aspect of your post and is indeed something I need to do more research.
I've talked to a few folks and they mentioned using a property management service, any thoughts on that?