Should I sell my house or rent it out?
Member since 2018 · 26 posts · 19 votes
Should I sell my house or rent it out?
Most Popular Reply
Investor · San Diego, CA · Member since 2016 · 1k+ posts · 975 votes
3y@Michael Cai STR would definitely be a way to get a better return on your equity, but you might not be able to STR there depending on your local laws. Where is the property?
If you're accredited, there are many options to get a 10% return, but you MUST vet the sponsor thoroughly. The quality and integrity of the team are more important than the return numbers advertised on a particular idea.
Good luck and let us know what you decide so others can learn from your journey!
56 Replies
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
@Michael Cai
Whichever provides the better return.
$400k as a passive investor can get you $40k a year, the investment property gets you $10k + potential appreciation but deal with tenants
I know what I would do.
7e investments53 Reviews - Member since 2018 · 26 posts · 19 votes3y
I think I get less than $10k a year income considering all the expenses or vacancies.. also after three years I will have to pay tax when I sell, currently it's tax free since it's my primary home.
What can I passively invest in to get 10%/year?
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
I like that interest rate, rent the property or wrap it.
- Investor · San Diego, CA · Member since 2016 · 1k+ posts · 975 votes3y
@Michael Cai STR would definitely be a way to get a better return on your equity, but you might not be able to STR there depending on your local laws. Where is the property?
If you're accredited, there are many options to get a 10% return, but you MUST vet the sponsor thoroughly. The quality and integrity of the team are more important than the return numbers advertised on a particular idea.
Good luck and let us know what you decide so others can learn from your journey!
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes3y
That interest rate is really good and that appreciation is really good to me. I can't tell what location you're in but if you're in an appreciation market with a low interest rate I would lean towards renting it out. If you happen to be in California, we have Proposition 13, where our property taxes can only go up 2% a year for primary home owners and investors.
I considered selling my San Francisco Bay Area property a SFH with tons of equity and my property tax is reasonable for California. After running the numbers and talking to at least 20 people, it would make no sense to sell it and buy 5 to 7 SFHs in another state (Midwest or Memphis) where I would cash flow the same amount or buy in an appreciation market (Nashville Tennessee or Florida Panhandle) where I'm negative cash flow at these prices and interest rates. I would rather own 3 or 4 quality Class A properties than 20 Class C properties. The more properties, the more tenants and potential headaches.I did a cash out refinance to renovate it and there's a tenant in now. There was money left over from the refi and I did buy a SFH in Indiana. I'm investing in other states but not at the expense of selling off my California properties. I almost went in on a large apartment complex in Michigan with other investors but changed my mind - I guess that's crowdfunding. I really like SFH but maybe I should have gone that route.
If you were to sell your home, what rental markets were you considering?
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes3yYou need to find out if you have any capital gains.
Quote from @Michael Cai:
I'm moving out of state and trying to decide if I should sell or rent my current home.., my current house built in 1996 is worth about 630k, mortgage balance is 210k on it. monthly payment is 2100 including tax and insurance. market rent is about 3000k. I have low mortgage interest rate on it is 2.6%. House price has potential of going up more.. (bought in 2015 for 340k)
If I keep the house, I can get 3000-2100 = 900/mo (300 less if I use a management company), also over $1000 of the rent each month goes towards principle.
If I sell the house, I can net a little less than 400k, but what can I invest that into that has better return? Airbnb? Crowdfunding Real estate? buy another rental free and clear?
What would be a wise decision?
I think things change a lot after you finally sell if you haven't lived there for 2 of the previous 5 years.
I don't sell so I'm forgetful on the penalty but I think you are taxed on capital gains over $250,000 if single and $500,000 if filing jointly and if living there. I think you lose that exemption if not living there for 2 of the last 5 years. - Investor · Member since 2023 · 35 posts · 29 votes3y
You have several good financial options that folks mentioned above, but there is also a psychological/emotional component. Do you want to deal with renting a single family home or managing an AirBnB in another state? Do you need the cash? How can you use the house or cash towards your next short or long term goals? How busy are you with your full time job and life? Neither seems to be a terrible financial decision.
Sell it and put the cash to work in other investments or keep it at an amazing interest rate and get some cash flow. If you are going to sell it, just have a plan for the cash whether that is an active or passive investment.
- 3yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
Look up the tax implications. I think in the US if you lived in it for the last 2 or 3 out of 5 years, you don't have pay capital gains. I'd rent it out for 2 years and then sell it.
- Member since 2018 · 26 posts · 19 votes3y
Thanks for all the reply. The house is in Charlotte, I have to pay tax on the gain if I rent it for more than 2 years, so I might as well sell it now? Unless I hold it for a really long long time.. my parents already have a rental property in Charlotte and they are buying one in Georgia, so between my parents and I we will have three properties even if I sell this one.
The new townhouse I move to in Georgia I have a mortgage of 160k at 6.125% interest rate, so I could pay this off and have 200k+ left over to do some passive investing.. paying off something at 6.125% is not a bad deal.
It's just this house interest rate is only 2.6% so it's a shame to let it go! but I'm cash rich so cash out would certainly help me one way or the other, sometimes I even take months of between jobs..
It's a hard decision but I'm leaning towards just sell it..
- Member since 2018 · 26 posts · 19 votes3yI meant to say I'm NOT cash rich..
Quote from @Michael Cai:
Thanks for all the reply. The house is in Charlotte, I have to pay tax on the gain if I rent it for more than 2 years, so I might as well sell it now? Unless I hold it for a really long long time.. my parents already have a rental property in Charlotte and they are buying one in Georgia, so between my parents and I we will have three properties even if I sell this one.
The new townhouse I move to in Georgia I have a mortgage of 160k at 6.125% interest rate, so I could pay this off and have 200k+ left over to do some passive investing.. paying off something at 6.125% is not a bad deal.
It's just this house interest rate is only 2.6% so it's a shame to let it go! but I'm cash rich so cash out would certainly help me one way or the other, sometimes I even take months of between jobs..
It's a hard decision but I'm leaning towards just sell it..
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes3y
There is one certainty...sell before the three years are up to preserve the tax free gain. Congrats on the huge gain...it may be a 400+% return on your original down payment (depending on the size of the down payment).
- Member since 2018 · 26 posts · 19 votes3y
Quote from @Mike Dymski:
There is one certainty...sell before the three years are up to preserve the tax free gain. Congrats on the huge gain...it may be a 400+% return on your original down payment (depending on the size of the down payment).
Thanks you are right I put down 20% so it's about exactly 400% tax free return, I feel like price can still go up as lot of people from the north are moving south to cities like Charlotte, maybe I should hold it for 2 years then sell like someone suggested.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes3y
Quote from @Michael Cai:
Quote from @Mike Dymski:
There is one certainty...sell before the three years are up to preserve the tax free gain. Congrats on the huge gain...it may be a 400+% return on your original down payment (depending on the size of the down payment).
Thanks you are right I put down 20% so it's about exactly 400% tax free return, I feel like price can still go up as lot of people from the north are moving south to cities like Charlotte, maybe I should hold it for 2 years then sell like someone suggested.
Nice. You can sell and put the 400k in a risk-free, no hassle, US Treasury or CD and earn a 5% return; so, that should be your floor for total return expectations. The spread between 5% and what you would earn from another investment, such as that 400k invested in your house, is what you are getting paid for taking on the risk and hassle. If you can get an 11% return for real estate, you're getting paid 6% for your risk and time...and the true return on real estate is 6% because the first 5% is guaranteed with risk free investment right now.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Michael Cai:
I'm moving out of state and trying to decide if I should sell or rent my current home.., my current house built in 1996 is worth about 630k, mortgage balance is 210k on it. monthly payment is 2100 including tax and insurance. market rent is about 3000k. I have low mortgage interest rate on it is 2.6%. House price has potential of going up more.. (bought in 2015 for 340k)
If I keep the house, I can get 3000-2100 = 900/mo (300 less if I use a management company), also over $1000 of the rent each month goes towards principle.
If I sell the house, I can net a little less than 400k, but what can I invest that into that has better return? Airbnb? Crowdfunding Real estate? buy another rental free and clear?
What would be a wise decision?
sell and move most of the asset to debt/note/specialty financing.
This "good problem" could only worse in the future.
At certain times folks would be mature enough to convert from "equity investors" into becoming a lender in themselves.
When you convert to become a lender, even if the SF asset goes into default, you still make money after the foreclosure proceeding. - Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Mike Dymski:
Quote from @Michael Cai:
Quote from @Mike Dymski:
There is one certainty...sell before the three years are up to preserve the tax free gain. Congrats on the huge gain...it may be a 400+% return on your original down payment (depending on the size of the down payment).
Thanks you are right I put down 20% so it's about exactly 400% tax free return, I feel like price can still go up as lot of people from the north are moving south to cities like Charlotte, maybe I should hold it for 2 years then sell like someone suggested.
Nice. You can sell and put the 400k in a risk-free, no hassle, US Treasury or CD and earn a 5% return; so, that should be your floor for total return expectations. The spread between 5% and what you would earn from another investment, such as that 400k invested in your house, is what you are getting paid for taking on the risk and hassle. If you can get an 11% return for real estate, you're getting paid 6% for your risk and time...and the true return on real estate is 6% because the first 5% is guaranteed with risk free investment right now.
100.
Becoming equity investor is difficult at this particular time, becoming lender and you would be cash-flowing.
One funny thing is I do have portfolio of hundred of REIT/BDC/stock so even though the stock price of those assets goes down, but because it has double digit dividend, the total market value of portfolio never goes down. Every lunch saving that I had I just re-invested into portfolio. This is one way to say, if you manage your portfolio correctly, it's almost a riskless strategy.
- Member since 2018 · 26 posts · 19 votes3y
Quote from @Carlos Ptriawan:
Quote from @Michael Cai:
I'm moving out of state and trying to decide if I should sell or rent my current home.., my current house built in 1996 is worth about 630k, mortgage balance is 210k on it. monthly payment is 2100 including tax and insurance. market rent is about 3000k. I have low mortgage interest rate on it is 2.6%. House price has potential of going up more.. (bought in 2015 for 340k)
If I keep the house, I can get 3000-2100 = 900/mo (300 less if I use a management company), also over $1000 of the rent each month goes towards principle.
If I sell the house, I can net a little less than 400k, but what can I invest that into that has better return? Airbnb? Crowdfunding Real estate? buy another rental free and clear?
What would be a wise decision?
sell and move most of the asset to debt/note/specialty financing.
This "good problem" could only worse in the future.
At certain times folks would be mature enough to convert from "equity investors" into becoming a lender in themselves.
When you convert to become a lender, even if the SF asset goes into default, you still make money after the foreclosure proceeding.Nice, how do I get started in private lending? looking to do better than the 5% CD return without too much risks.
- 3yCorby GoadeBusiness MemberInvestor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
There's no question here- keep it 100%. It will be cash flow positive, you have an interest rate that is a quarter of inflation- you'll never see rates like that again. You can depreciate it, you can leverage your equity and scale your portfolio.
Think of it this way- almost any investor looking at deals today- if they saw the numbers you ALREADY have on this house, that would be a grand slam deal.
Finally- you don't get free by selling your assets, you get free by keeping them, Don't lose sight of the prize and take the quick payoff VS the life changing, slow burn.
Best of luck!
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Michael Cai:
Quote from @Carlos Ptriawan:
Quote from @Michael Cai:
I'm moving out of state and trying to decide if I should sell or rent my current home.., my current house built in 1996 is worth about 630k, mortgage balance is 210k on it. monthly payment is 2100 including tax and insurance. market rent is about 3000k. I have low mortgage interest rate on it is 2.6%. House price has potential of going up more.. (bought in 2015 for 340k)
If I keep the house, I can get 3000-2100 = 900/mo (300 less if I use a management company), also over $1000 of the rent each month goes towards principle.
If I sell the house, I can net a little less than 400k, but what can I invest that into that has better return? Airbnb? Crowdfunding Real estate? buy another rental free and clear?
What would be a wise decision?
sell and move most of the asset to debt/note/specialty financing.
This "good problem" could only worse in the future.
At certain times folks would be mature enough to convert from "equity investors" into becoming a lender in themselves.
When you convert to become a lender, even if the SF asset goes into default, you still make money after the foreclosure proceeding.Nice, how do I get started in private lending? looking to do better than the 5% CD return without too much risks.
most un-leverage debt is 10% return, at a conservative rate it is 8-10%, higher risk is 14%.
Get accredited investor certification (easy), and invest into one of those private debt funds. - Member since 2018 · 26 posts · 19 votes3yI know, it's a shame to let this one go.. but are you saying I hold this long term? in which case I will have to pay taxes if I sell it after renting it out for more than three years.. Does the number still work if I hold it for 10+ years? 2100 mortgage is a 15 year mortgage so will be paid off in 13 years if I leave it a rental.. If I have to sell it within three years, then it almost don't make a lot of difference if I sell it now or in 2-3 years.
Quote from @Corby Goade:
There's no question here- keep it 100%. It will be cash flow positive, you have an interest rate that is a quarter of inflation- you'll never see rates like that again. You can depreciate it, you can leverage your equity and scale your portfolio.
Think of it this way- almost any investor looking at deals today- if they saw the numbers you ALREADY have on this house, that would be a grand slam deal.
Finally- you don't get free by selling your assets, you get free by keeping them, Don't lose sight of the prize and take the quick payoff VS the life changing, slow burn.
Best of luck!
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Michael Cai:
I know, it's a shame to let this one go.. but are you saying I hold this long term? in which case I will have to pay taxes if I sell it after renting it out for more than three years.. Does the number still work if I hold it for 10+ years? 2100 mortgage is a 15 year mortgage so will be paid off in 13 years if I leave it a rental.. If I have to sell it within three years, then it almost don't make a lot of difference if I sell it now or in 2-3 years.Quote from @Corby Goade:
There's no question here- keep it 100%. It will be cash flow positive, you have an interest rate that is a quarter of inflation- you'll never see rates like that again. You can depreciate it, you can leverage your equity and scale your portfolio.
Think of it this way- almost any investor looking at deals today- if they saw the numbers you ALREADY have on this house, that would be a grand slam deal.
Finally- you don't get free by selling your assets, you get free by keeping them, Don't lose sight of the prize and take the quick payoff VS the life changing, slow burn.
Best of luck!
first of all, we can cash flow from equity investment like what you did, but you could cash flow as well from becoming lender/debt investment, and even cash-flowing from other methods (insurance, non-RE syndication and even dividend/REIT stock).
As we become a more mature investor, we just see investment as a transport and we can move/transfer our money from one asset class to another asset class.
In my eye the most riskless investment right now is investing at gov. bonds as the yield is high and bond notes are trending up. You could also still cashflowing from primary owner occupant investment, so you still get the best of the both world.
- 3yCorby GoadeBusiness MemberInvestor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
@Michael Cai Absolutely- you can still access most of that equity tax free if you keep it, and I assume you haven't had a buy and hold rental before? If not, you haven't even begun to experience the tax benefits and they only get better over time.
Yes- keep it, and if you want to scale, get a HELOC before you move out and begin your journey. Don't miss the forest for the trees- there are thousands of people here who are kicking themselves for selling their primaries and flips without really considering finding a way to keep them.
- General Contractor · Palm Desert, CA · Member since 2016 · 197 posts · 79 votes3y
I like the tax exclusion if you sell now. I would consult your CPA on this one. If you're going to move before you sell it, hopefully, it would sell quickly so you're not stuck paying rent or two mortgages. You can't put a tenant in if it's for sale. Good luck!
- Member since 2019 · 7k+ posts · 4k+ votes3y
If his LTV is < 50% I would sell it, his LTV is 30%. When the IRR of SF is single-digit now for next decade and selling has > 300k capital-gain free tax, it's an easy sell decision.I would rather pick $500K cash rather than $500/mo cash flow LOL. If one age is 50 and life expectancy is 65, the $500 per month cash flow would not make money one could enjoy. Been doing this couple of times.......
I re-invest the money that I had after the sold proceeding to re-investing into many debt investments syndication and also cash-flowing owner occupant primary and also BRRR projects that I oversee myself, so I still get triple win. It's really not that difficult if you know your market. With 500k on hands it's easy to make decision, 500 bucks a month is only equal to 5 dinner in average restaurant these days
- Member since 2018 · 26 posts · 19 votes3y
Quote from @Corby Goade:
There's no question here- keep it 100%. It will be cash flow positive, you have an interest rate that is a quarter of inflation- you'll never see rates like that again. You can depreciate it, you can leverage your equity and scale your portfolio.
Think of it this way- almost any investor looking at deals today- if they saw the numbers you ALREADY have on this house, that would be a grand slam deal.
Finally- you don't get free by selling your assets, you get free by keeping them, Don't lose sight of the prize and take the quick payoff VS the life changing, slow burn.
Best of luck!
I know, it's a shame to let this one go.. but are you saying I hold this long term? in which case I will have to pay taxes if I sell it after renting it out for more than three years.. Does the number still work if I hold it for 10+ years? 2100 mortgage is a 15 year mortgage so will be paid off in 13 years if I leave it a rental.. If I have to sell it within three years, then it almost don't make a lot of difference if I sell it now or in 2-3 years.
- Don't sell.
Quote from @Michael Cai:
Quote from @Corby Goade:
There's no question here- keep it 100%. It will be cash flow positive, you have an interest rate that is a quarter of inflation- you'll never see rates like that again. You can depreciate it, you can leverage your equity and scale your portfolio.
Think of it this way- almost any investor looking at deals today- if they saw the numbers you ALREADY have on this house, that would be a grand slam deal.
Finally- you don't get free by selling your assets, you get free by keeping them, Don't lose sight of the prize and take the quick payoff VS the life changing, slow burn.
Best of luck!
I know, it's a shame to let this one go.. but are you saying I hold this long term? in which case I will have to pay taxes if I sell it after renting it out for more than three years.. Does the number still work if I hold it for 10+ years? 2100 mortgage is a 15 year mortgage so will be paid off in 13 years if I leave it a rental.. If I have to sell it within three years, then it almost don't make a lot of difference if I sell it now or in 2-3 years.
Always asset Quality vs. Quantity for long term wealth. Listen to people whose net worth is more than yours. 90pct of the cash flow crowd make less money in real estate than someone who has a class A property and gets increased cash flow as rents go up and gets appreciation as well over time.
You have couple of years to decide on selling to get primary owner tax free capital gains. Now is a bad time to sell as buyers are burdened by high interest rate. You know the area, self manage, find a qualified tenant with good income and credit history who can sign a 2 year lease.
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