Sell or Rent Primary Residence?

Question

Greetings all, I am looking to get started in real estate and I was hoping to get some advice from BP on what to do with my primary residence. I am going to be staying at my parents house for about a year and essentially saving up for a downpayment on an investment property and paying off debt. I currently owe 155k on an FHA loan and it looks like I would be able to sell the property for around 205-210k, so possibly could walk away with 30-40k profit. PITI is $1200 per month and I believe i could rent it for $1400-1500 per month. The other option would be to refinance the house into a conventional loan and attempt to remove the PMI insurance which should get the PITI closer to $1000 per month and help out with the cash flow.

My long term strategy is buy and holding single family homes. My concern with my primary residence is that it was never bought as an investment property in mind and so I'm wondering if I should take the money from selling it and attempt to get a better cash-flowing property. Given the numbers above, would you guys advise to sell or keep the property and rent it out?

Vik Azeem · Answer

I appreciate the advice. I think I will go ahead and try to refinance my primary and then work on buying a 2nd property. I will still have the option to sell the house within 3 years and not pay capital gains or I can just keep it as a long term rental.

Riquelmi De La Rosaq · Answer

Are you calculating expenses? Management, Repairs, Cap Ex, Vacancy? If your Piti gets close to $1000 per month, $1400-1500 GOI leaves you a very thin margin. Plus if you lose that Tenant, you're dead in the water. Personally, I would sell the SFR and buy a 2-4 unit. There you have the option to live in one unit and have tenant/tenants pay for your mortgage and most if not all expenses. If you still want to live at your parent's house you can rent all units and get a much better cash flow. You should try using the Bigger Pockets Rental Calculator. Run your current SFR as well as a few 2-4 family homes in your area and decide for yourself.

If your area doesn't have a huge inventory for Multi-unit properties, look a little outside of your area. It doesn't have to be out of state, it could be a town over. Good Luck

Ramona Hall · Answer

$400 to $500 per month cash flow ( after refinancing ) is a pretty good return. I think lowering the pmi is a great strategy unless you want to take the profit out and buy up. I would look at what you can buy with $30-$40K and what would the cash flow look like. If it's the same as where you are at then just keep the current rental. Refinance into a Conventional Loan and then down the road buy another owner occupied property with cash you have saved.

Sell or Rent Primary Residence?

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