To Rent or Sell my current home?

Question

I am in the process of purchasing a new home for my family, but I am debating if I should rent my current home or sell it. My current home is a 3 bed/2 bath (1350 sq ft) house. I have about $25k equity in the current home. It should rent for about $1200 a month with mortgage at $658 a month. This would be my first time renting a property.

If I sell my current home, I would most likely use the equity to pay down or possibly pay off my student loans. Then set aside my monthly savings to get into the real estate investment  market at a later date.

What is the viewpoint of the BP community?

Brandon Abernathy · Answer

@CJ Ashton....Yes, I plan to manage the rental myself. My thought is that if I see that I going to need some help managing the property, I know that my neighbor would be willing to help and I have a friend that manages around 50 something properties himself.

Yes, this property is a 7 minute drive from my new home.

I have been in my current home for 11 years. I still owe about $106k for the current home. The mortgage is fixed rate.

I guess another item to note is that may plan on being in our new home for 5 to 7 years. So if we don't rent out the current property, the new property would more than likely be rented when we move out, but that is in another 5 to 7years. The realtor I am working with has also stated that he would be willing to help me find some investment properties and has been flipping houses for 20+ years himself.

The area that we live in is the fastest growing area in the state. I know the builders in the area are increasing their prices starting June 1.

CJ Ashton · Answer

With only $25K equity, I would keep it as a rental.  It seems like you would have a solid cash flow - and once you've built up a little cushion for bigger maintenance items, you can use that cash flow to pay down your student loans.

Of course, lots of other factors to consider... Would you be managing it by yourself?  If so, is it geographically close to your new home?  If not, would the management fee kill your cash flow?  You didn't say how long you've been in your current home, but however long it has been, you are that much closer to having it paid off and then having a cash flow machine on your hands.  Also, assuming you have a fixed rate mortgage, your cash flow is likely to increase as rents go up.

I think renting out your current home is one of the safest ways to begin investing.  If you decide you hate being a landlord, there's nothing to stop you from selling the place 1 or 2 years down the road.