Should I sell my house or rent it out before moving?

Buying & Selling Real Estate
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Should I sell my house or rent it out before moving?

Andrew Oddo
Homeowner · San Diego, CA · Member since 2021 · 4 posts · 3 votes

Hello, I bought my first home in texas just about 2 years ago, a 2011 built 3 bedroom 1500sqft home for 124k. I owe about 91,500 on the home now and it's worth around 140-160k now. I'm on military orders to move to San Diego at the end if june. Ive been debating selling the house in texas and trying to buy in CA. however I'm having second thoughts about selling now. I already have a buyer (current tenant) and we agreed on a sale price of 152,000. However this is my first time selling a home and I know there will be other costs involved with selling the house. I'm wondering if its better to just keep the house in texas and rent it, out or sell the house with the intent of buying in CA (but san diego is very expensive). I'll only be in CA for two years so maybe its better to just rent a small studio during my time there and keep my house in texas. Any advice is appreciated. Thank you

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
5y

Typically if you are only going to be living in a place for 2 years, you are better off renting.  The costs of selling and buying a home will quickly eat up any appreciation that happens.

For the current home, will the rent cover all of the costs?  Not just mortgage, but taxes, repairs, etc.  Are you able to manage it remotely if the current tenant leaves?

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    Typically if you are only going to be living in a place for 2 years, you are better off renting.  The costs of selling and buying a home will quickly eat up any appreciation that happens.

    For the current home, will the rent cover all of the costs?  Not just mortgage, but taxes, repairs, etc.  Are you able to manage it remotely if the current tenant leaves?

    3Reply
  • Mark Frattini
    Real Estate Agent · San Diego, CA · Member since 2014 · 338 posts · 176 votes
    5y

    @Andrew Oddo

    Are you interested in growing your real estate portfolio? If yes then rent out the home in Texas. Buy something here in San Diego that you can house hack and rent out when you leave in two years. Not interested in growing a real estate portfolio? Sell the house in Texas and pay the selling cost. No taxes on the equity gains which is great. Find a nice rental in San Diego and easily pick up and move in two years.

    I'm guessing since you're on BP you are more interested in the former than the latter. Not sure what your current portfolio looks like now but if it's just the SFH in Texas I recommend keeping it. Selling your only piece of real estate in one of the fastest appreciating times in history and renting isn't ideal in my opinion. Unless you are planning on redeploying that capital into another asset that is going to outperform real estate.

    3Reply
  • Elissa Scotland
    Rental Property Investor · San Diego, Calif · Member since 2018 · 4 posts · 3 votes
    5y

    In your shoes, I would keep your Texas house. Start thinking of it as a house, an income-generating house. Not your home.

    When you move to San Diego, see if there is a way that you can house hack a rental. ie rental arbitrage.  Rent a two bedroom place and sublet the second room to subsidize your share of the rent. You could live in the smaller room and rent out the master.  The ultimate aim is to live at least rent-free while preparing for your next property purchase.

    San Diego is a lovely place, but it is expensive to live where others vacation.

    2Reply
  • Kevin Hickey
    Real Estate Agent · San Diego · Member since 2020 · 1 post · 1 vote
    5y

    Hey Andrew, it all depends on how you want to invest in rental property and what you're comfortable with. If you are comfortable with keeping your house and living out of state, then you should keep it. If being out of state and having tenants in your property which may cause a headache is not what you want, then you should sell it. Like Mark said, your net is tax free. 

    Do you know for sure you are only going to be in San Diego for two years? I have met many military veterans that have said the same thing and ended up staying in San Diego much longer. Also with having availability to a VA loan, you could have easy access to buy a property here in CA. As you know, there are many more advantages of home ownership than renting.

    1Reply
  • James De Leon
    Real Estate Agent · San Diego, CA · Member since 2020 · 69 posts · 32 votes
    5y

    @Andrew Oddo

    Hi Andrew,

    When it comes to your house in Texas I would say that it depends on your goals. If your goal is to get passive income then keeping it would be ideal. If you have a different goal such as stashing capital then of course you should look into selling it so that you could possibly redeploy that capital into a rental property, etc. 

    If you were to sell your home for 152k assuming you don't have any realtor fees (since you agreed a price with buyer) if you go that route conservatively you're looking at between 5-10k closing costs. Which would equate to about 45-50k profit, which would be awesome! If your house cash flows right now and you goal is passive income then I would definitely hold it.

    Next up, I would like to you welcome you to San Diego Andrew! This city is awesome but like you said can be quite expensive. With having your VA loan it becomes a bit easier to get a house even with the prices. I was able to get a 4 plex close to downtown SD and I got paid to buy the house since I used VA loan to acquire it (E5 pay). If you choose to buy here and hold it then that would be a viable option as well. Again it really depends on your goals and what you want to accomplish. I'm sure whichever route you choose, it'll be a good one!

    Let me know if you have questions and I'll be happy to connect and answer questions. Good luck!

    1Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    5y

    @Andrew Oddo rent if the numbers make sense! Don't sell unless you have to.

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    5y

    I am going to take the opposing view.  I cannot tell you how many times over the years I have seen soldiers get wiped out on these type of deals.  Unless you have a large reserve account to take care of large repairs and vacancies,  sell the property.  What would you do if you had a 2 month vacancy?  Had to spend $5000 on a new a/c?  Even little items can add up.  Any profit you make is tax free so take the profit and run

    1Reply
  • Matt StricklenPro Member
    Investor · Austin TX · Member since 2020 · 224 posts · 152 votes
    5y
    Originally posted by @Jordan Moorhead:

    @Andrew Oddo rent if the numbers make sense! Don't sell unless you have to.

    I agree. If you can keep your housing cost low in CA, keep your foothold in Austin. There is a lot of room for continued appreciation on your property here, you've already got the landlording experience...let it ride for a couple of years.

    PS thank you for your military service.

    1Reply
  • Andrew Oddo
    OP
    Homeowner · San Diego, CA · Member since 2021 · 4 posts · 3 votes
    5y
    Originally posted by @Greg H.:

    I am going to take the opposing view.  I cannot tell you how many times over the years I have seen soldiers get wiped out on these type of deals.  Unless you have a large reserve account to take care of large repairs and vacancies,  sell the property.  What would you do if you had a 2 month vacancy?  Had to spend $5000 on a new a/c?  Even little items can add up.  Any profit you make is tax free so take the profit and run

    I hear you on this. Some more details, the home in Texas is a 3 bedroom 1500 sqft built in 2011. Ive had virtually no problems since Ive owned the home, and I only owe ablut $91,500 on the property. Taking profits selling looks appealing, but I'm not sure if costs of selling are worth it, especially if the market continues to go up where I am. I'm currently searching for VA loan lenders in San Diego and looking to buy a triplex or fourplex in the area with no money down. It could be a great situation living in the smallest unit and renting the others.

    1Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    5y

    @Andrew Oddo

    I hear you.  However, back to my point.  Now you have a home with 10 year old mechanicals.  Are you prepared to pay $1200-1500 for a hot water heater, $5-6k for an A/C, stove, dishwasher etc.  A make ready when a tenant moves out could cost you $3000.  The military has taught you and I to always be prepared so use that when making a decision

    I have been at this for more than 30 years and spent a good amount of it doing deals in military towns and seeing/hearing the downside of your plan.  Don't make a decision over not wanting to spend a few thousand in closing costs 

    1Reply
  • Doug Spence
    Investor · San Diego, CA · Member since 2016 · 1k+ posts · 975 votes
    5y

    @Greg H. Your concerns are valid, but easily mitigated with some reserves set aside, or even a home warranty to cover big ticket items (all buy-and-hold investors should have reserves set aside for their properties). If @Andrew Oddo can cash flow the Texas home - I'm still not sure if he can as I haven't seen what it can rent for and what his expenses would be - then it makes sense to keep it in my opinion. Texas is a strong market, and chances are the home will increase his net worth by a fair amount over the next 5-10 years if he keeps it.

    So what are the numbers on the Texas property as a rental @Andrew Oddo ?

    0Reply
  • Andrew Oddo
    OP
    Homeowner · San Diego, CA · Member since 2021 · 4 posts · 3 votes
    5y
    Originally posted by @Doug Spence:

    @Greg H. Your concerns are valid, but easily mitigated with some reserves set aside, or even a home warranty to cover big ticket items (all buy-and-hold investors should have reserves set aside for their properties). If @Andrew Oddo can cash flow the Texas home - I'm still not sure if he can as I haven't seen what it can rent for and what his expenses would be - then it makes sense to keep it in my opinion. Texas is a strong market, and chances are the home will increase his net worth by a fair amount over the next 5-10 years if he keeps it.

    So what are the numbers on the Texas property as a rental @Andrew Oddo ?

     My mortgage is $855/ mo. Currently I'm bringing in around $1200 monthly renting out the other two rooms. I imagine I can rent the whole place for about the same, maybe a bit more.

    0Reply
  • Doug Spence
    Investor · San Diego, CA · Member since 2016 · 1k+ posts · 975 votes
    5y

    @Andrew Oddo Are you self managing?

    0Reply
  • Andrew Oddo
    OP
    Homeowner · San Diego, CA · Member since 2021 · 4 posts · 3 votes
    5y
    Originally posted by @Doug Spence:

    @Andrew Oddo Are you self managing?

     Currently yes. I'm figuring Ill hire a property manager when I leave so ill have to pay them around 10%. I don't think I want to worry about managing the home from another state on my own.

    0Reply
  • Doug Spence
    Investor · San Diego, CA · Member since 2016 · 1k+ posts · 975 votes
    5y

    @Andrew Oddo I think its a good idea to factor property management into expenses, whether or not you self manage. I've been self-managing one of my properties for a few years now and its been very low stress, because I've had fantastic tenants and the property is in good shape. Its just not worth paying $180 for 20 minutes worth of 'work' per month. I do have property management on all my others though. 

    When you do your analysis, make sure you factor in ALL expenses, including property management, vacancy, repairs/maintenance, capital expenses, and any others that apply to your specific home (HOA, landscaping, etc).

    Best of luck and keep us updated on what you decide to do! 

    0Reply
  • JJ P.
    Real Estate Agent · San DIego · Member since 2019 · 177 posts · 185 votes
    5y

    I vote for renting it.   Yes, there might be a hassle or two, or three, but you live in the house and already have an idea of its weak spots.  If it all works well, no quirks, it's likely to keep working for another couple of years.  If it doesn't, call the repair guy in and get it fixed.   It's not as onerous as it's made out to be.    You might already have a repair guy, since you've lived there for a while.   You can hop on a cheap flight and spend the weekend there, if you have to.   Pick/screen your tenant well, and that will go a long way towards happy landlording.  

    Just a gentle reminder: San Diego has some staggering home prices compared to Texas, maybe 4x or more, and a well priced multi unit building is a really hot, scarce commodity in most areas of the county. It could be challenging to nab one in this hot hot market with a VA loan.

    You will have the magic of capital gains in 2 places that you will have lived in for 2 out of the past 5 years, making it possible to do a hopscotch move via 1031 exchanges. I think, combined with the VA loans, our service men and women have an amazing opportunity to build wealth while being stationed here and there across the nation. You can get in cheaply, live for 2 or more years, and sell within 5 if you so choose.

    We have some amazing military bases in our county. Due to the high cost of living, you will also have one of the highest housing stipends in the military.   I think Camp Pendleton is the very highest in the nation, or close to it.    

    We have both lenders and realtors that specialize in VA purchases.

    Good luck, and welcome to one of the best places to live in the world! 

    0Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    5y

    @Andrew Oddo

    I am assuming by the price point you are at Ft Hood? Could be Ft Bliss but their price point is a bit higher for 2011 construction.  I bought my first house while stationed there and owe much of the capital I now operate with the dozens and dozens of flips and rentals I have done there over the years.  I will state again my best advice based on actual knowledge of the area:

    Property managers meaning a good one is hard to come by.  They overcharge for repairs and make readies as with the transient nature of tenants rely on this to enhance their profits

    Thought the economy is now more diverse that it used to be, any downtown in troop numbers could hurt 

    As a soldier, you will not be able to easily come in town and take charge.  Your property is 10 years old and big ticket items will fail.  I have known many a soldier to have their equity and cash flow devastated by this.  I am not in anyway down on the Killeen market but I just advise those with small margins to take the money and run.  $300 a month cash flow WILL be negative cash flow once property management, repairs and vacancies are factored in

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  • Adrian Fajardo
    Rental Property Investor · Killeen, TX · Member since 2017 · 337 posts · 100 votes
    5y

    Hello! There is a wealth of knowledge on this thread and all of them are right in terms of exit strategy. If I was in your shoes, I would begin in the end in mind then work backwards from there. Think of the long-term implications. Pull up a calculator and see what would give you a positive on the bottom-line. If you're unsure what to do, it just means you don't know what outcome you want to achieve. Once you know that, everything else will fall into place.

    I wish you the best in your investing Journey!

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