I bought a house before I knew about Bigger Pockets and wasn't considering renting it. Now I'm being relocated for work and I'm thinking about keeping this house to rent. The problem is, I cant make the numbers work. Its a $300k house and the tax rate is 3.2% so PITI is $2150/mo on its own. I don't think I will be able to get that much in rent. But, it is in an up-and-coming neighborhood that I am confident will appreciate. What would you do?
Tough call, but if it isn't positive cash flow it will eat a hole in your wallet over time. You should always aim for positive cash flow. Not always available, but that's the goal.
Does it have equity? If so, you're better off selling.
I'd do some market research and see how much rents are from comparable properties. That's as easy as using C-list and Zillow (for starters). How do you plan on managing it out of state? How much are houses selling for in your area, could you flip your house?
I do have about 60k equity in it. There is another house for rent on my same street that is the same floor plan and its been vacant for at least 2 months. Its advertised on realtor.com for 2300/mo.
@Matt McGuire , I think your interests will best be served selling at this point.
1. You're early in your REI career and both converting a primary to rental and doing it long distance successfully as one of your first REI gigs isn't the easiest.
2. In general primary residences with all their "personal touches" that make them a home do not make the best rentals.
3. As you go through life you want to take every penny of profit you can from any source when you can tax free. Because you are moving due to an employment situation you can sell that property and take at least a % of the gain tax free. If you have lived in that property for 2 out of the 5 years prior to sale you can exempt the first $250K of gain ($500K if married) tax free!! If you lived in it for 1 year and have to move for job related reasons you'll still get 50% of the gain up to those $250/$500K limits.
Take the money off the table and look to your next acquisition close to where you're going to reside as you get to know that market.
Thanks for everyone's comments! I love that I have this resource to bounce ideas around. My gut says sell it too. I just thought maybe this would be my opportunity to get a rental. I'll find one soon though.
@Dave Foster, I appreciate the insight. I knew I could do a 1031 exchange and roll the money into the new house, but I didn't know I could keep any of it tax free. That's great information.
Liberty Hill is a good expansion area outside of Austin now. If you don't need the equity i would look at renting if possible or doing an owner finance deal on it with higher interest rate to cover the underlying lien. Eazy-Peezy
How big is the land or is it in a neighborhood?