Moving... sell or keep & rent current primary residence?

Question

Hi BP - Going back and forth about this and wondering what other investors would do with a previous primary residence. I just purchased a different home to move into that needs work, so I'm hoping to build up some sweat equity there, but I still need to decide what to do with my current home - sell or rent??

~Single family townhome-style property (tall & narrow), 2015 build, with a very small lot (if you know the Shady Acres area of Houston, TX - practically nothing outside the boundaries of the structure itself, but we do have a nice-sized patio) in a desirable A-class neighborhood with loads of new construction in a similar style.

~Existing mortgage = $365k / Current value = $480k / Rent value = $3k / bought in March 2019 @ $389k; refinanced in Dec. 2020.

~Cash flow would be positive, but small - around $100 - and doesn't fit the criteria of what I would normally invest in.

Is it worth it to keep the property to rent and avoid all the fees associated with selling for potential continued appreciation? Or does it make more sense to cash in on the hot seller's market and roll my funds into something else (specifically, renovating the new property or buying something else)? Or just get a HELOC to finance other acquisitions?

I've lived in the property long enough that I won't have capital gains tax to worry about if I sell in the next 3 years.

Thanks all!

Lee Hampton · Answer

@Holly Brueggman

I’m leaving Shady Acres, should I take 610 S or 610 N?  Should I wear blue jeans or a suit?  The answer to these questions along with yours is simple; It depends on where you are going.   To provide a valuable response, some basic information is required.

• Are you primarily focused on Cash Flow or Appreciation?
• High Risk to achieve highest reward, or slow and steady?
• You mentioned “what I normally invest in” Are the types you normally invest in available in this market.   If not, what do with the money and does that get you a higher rate of return.

Bottom line, develop core principles and evaluate each decision against that.   Balance should be one of your core principles.  I'll throw in my professional view.  like Shady Acres as a long term prospect.   I think it will yield above average appreciation but below average cash flow.   The one way to boost the cash flow is thru STRs.   It is in a good location for STR's.    Happy Investing!

Antoine Martel · Answer

Hi Holly,

I think an argument could be made for keeping and selling.

If you desire to keep the primary, you can keep investing in RE by raising money from investors and using your current portfolio to show the work you've done. You can take a portion of the equity and cashflow for the work you do with putting little to no capital in. You can also refinance and see how many more SFR you can get with that!

If you want to sell it, I think you'd need to see how far your capital could go in investment properties. The cashflow could cover your living expense & rent. Then you could potentially live for free!

Good luck in your decision!