Should I rent or sell?

[Sean Michael]

I’ve been wanting to find a rental property since I started listening to bigger pockets, so when my wife and I decided we wanted to relocate from Denver to San Diego I thought it would be a perfect opportunity to rent our home in Denver and save for future properties in SD.

After running the numbers, I’m having some doubts about this strategy. After expenses and selling fees we would have about $250k in hand after selling.  If we rent the home, monthly rent will be about $2.5k.  Since I’m out of state I will be hiring a management company.   Many of them charge 40% of first month to get a tenant and 25% for lease renewals, as well as 9% per month for month-to-month management.  I pay $1.65k/month in mortgage/taxes/insurance.  When I run these numbers For one year that’s about $30k income - $19.8k house - $3.5k management = $6.7k net.  When I start thinking about vacancy or maintenance, I’m looking more towards $5k net for the year.

I have a hunch on what the right answer is, but want to check with others to make sure this is the right decision.  Even $6.7k is a return on equity of 2.68% (assuming I have 250k and can get from selling the home).  A yearly return of 2.68% is low enough that it seems easier to just invest this money in super safe assets and wait to find a better investment property in SD with a higher return and manage it myself.  Any thoughts?