Should I sell my house or rent it out?
Member since 2018 · 26 posts · 19 votes
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 $1000 of the rent each month goes towards principle.
If I sell the house, I can net a little less than 400k, but what can I invest that into that has better return? Airbnb? Crowdfunding Real estate? buy another rental free and clear?
What would be a wise decision?
@Michael Cai STR would definitely be a way to get a better return on your equity, but you might not be able to STR there depending on your local laws. Where is the property?
If you're accredited, there are many options to get a 10% return, but you MUST vet the sponsor thoroughly. The quality and integrity of the team are more important than the return numbers advertised on a particular idea.
Good luck and let us know what you decide so others can learn from your journey!
@Michael Cai Absolutely- you can still access most of that equity tax free if you keep it, and I assume you haven't had a buy and hold rental before? If not, you haven't even begun to experience the tax benefits and they only get better over time.
Yes- keep it, and if you want to scale, get a HELOC before you move out and begin your journey. Don't miss the forest for the trees- there are thousands of people here who are kicking themselves for selling their primaries and flips without really considering finding a way to keep them.
My first CA rebtal home in Folsom, I bought it for 255k in 2012. I rented for 1750$ and broke even on cashflow. I took a 15 year mortgage, refinanced at 2.25 pct and only have 40k left on the original 205k loan. I paid off a few 100$ a month once in a while . Property is worth 700k and rents now for 2850$ with 1000$ cash flow. In 2 years I will own it clear. I don't plan to refinance, the cash flow of 3000$ is what I seek. There is no need to keep chasing volume in assets, I have 2 other sfh in folsom that will be paid off in 10 years. Cashflow is not king, debt free with high quality growth assets is the king.
That's quite a number of real estate transactions. On the Cleveland properties are these Class C or D when you said tenant class isn't appealing anymore?
I just purchased a Class C potentially moving up to Class B SFH in the Indianapolis area. It's listed for rent by my property management team. My other 3 properties are Class A (two SFH, one in Bay Area, one in very nice Indianapolis suburb with great schools) and multi-unit in Bay Area (with co-investors). I'm not sure if I made the right move by going Class C but I can't give that house back to the seller lol...There's no Class A property anywhere that I've found that will positive cash flow or even break even (meaning rent covers mortgage PITI, not counting vacancy rate, capital expenses, or repairs)
I don't think I should 1031 exchange the Class A Bay Area SFH to buy 5 to 20 Class C properties in the Midwest (or anywhere out of the Bay Area like Central Valley or Stockton. That was the recommendation by a few investors. That seems like a huge headache. I'm at loss of what to do so I'm not buying anything for now until the Class C house gets rented out and put my money into index funds and a 3.8% premium savings account.
@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.
My first CA rebtal home in Folsom, I bought it for 255k in 2012. I rented for 1750$ and broke even on cashflow. I took a 15 year mortgage, refinanced at 2.25 pct and only have 40k left on the original 205k loan. I paid off a few 100$ a month once in a while . Property is worth 700k and rents now for 2850$ with 1000$ cash flow. In 2 years I will own it clear. I don't plan to refinance, the cash flow of 3000$ is what I seek. There is no need to keep chasing volume in assets, I have 2 other sfh in folsom that will be paid off in 10 years. Cashflow is not king, debt free with high quality growth assets is the king.
That's quite a number of real estate transactions. On the Cleveland properties are these Class C or D when you said tenant class isn't appealing anymore?
I just purchased a Class C potentially moving up to Class B SFH in the Indianapolis area. It's listed for rent by my property management team. My other 3 properties are Class A (two SFH, one in Bay Area, one in very nice Indianapolis suburb with great schools) and multi-unit in Bay Area (with co-investors). I'm not sure if I made the right move by going Class C but I can't give that house back to the seller lol...There's no Class A property anywhere that I've found that will positive cash flow or even break even (meaning rent covers mortgage PITI, not counting vacancy rate, capital expenses, or repairs)
I don't think I should 1031 exchange the Class A Bay Area SFH to buy 5 to 20 Class C properties in the Midwest (or anywhere out of the Bay Area like Central Valley or Stockton. That was the recommendation by a few investors. That seems like a huge headache. I'm at loss of what to do so I'm not buying anything for now until the Class C house gets rented out and put my money into index funds and a 3.8% premium savings account.
Becca
You are doing the right thing by not flipping bay area home for 10x the headaches by buying a larger no. of low quality assets. The cash flow crowd and the ones repeating what the gurus tell feel the only way to be rich is to have 100s of doors. Multi asset offers scale but the days of easy money due to cap compression are gone and will not return.
the issue with buying 10 of 100k homes vs. 1mm class A asset is that you have 10x PM costs, overhead, Capex costs turnover costs, and your probability of having atleast 1 bad tenant that won't pay and game the system is close to 100pct. PM charges for turnover are not cheap and pro forma usually underestimate true bills. Basic painting and fixes can be 3k per home , roof cost is same whether it's a 1mm home or 100k home. The reality is as percent of home value, your expenses will be a lot with class C. I made money in Cleveland (all class c+) as I bought cheap in 2017-2018. The homes I bought for 55k are worth 120k. If I included all the turnover costs and capex expenses, I didn't make any money via cashflow. I won't be buying there at today's prices as I will surely lose money with limited future appreciation. When markets go down, your class A home won't drop as much and will spike in next bull run. I can't afford in bay area to buy for investment home, so buy in folsom. When it's time to upgrade my primary home which has appreciated from 1mm to 2.4mm in last 10 years, I will rent it out and buy a new one as my mortgage is fixed and long term appreciation is enough for me vs. cashflow.
investing systematically every month into an index fund is a good approach. I think in 6 months to a year, as multi asset values drop when owners cant refinance and cashflow is negative will be forced to sell, you can consider investing into quality conservative sponsors into new syndication deals.
How do I tell if my property is class A, class B or class C.. it's a 1.5 story 2900SF single family in a nice neighborhood, close to shopping/restaurants and everything, on a half acre lot with great schools, it's a bit old built in 1996, a relatively big yard need mowing..(wonder if tenant will keep it up), mature landscape but subdivision has no amenities like swimming pool or playground..
How do I tell if my property is class A, class B or class C.. it's a 1.5 story 2900SF single family in a nice neighborhood, close to shopping/restaurants and everything, on a half acre lot with great schools, it's a bit old built in 1996, a relatively big yard need mowing..(wonder if tenant will keep it up), mature landscape but subdivision has no amenities like swimming pool or playground..
class A
@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.
My first CA rebtal home in Folsom, I bought it for 255k in 2012. I rented for 1750$ and broke even on cashflow. I took a 15 year mortgage, refinanced at 2.25 pct and only have 40k left on the original 205k loan. I paid off a few 100$ a month once in a while . Property is worth 700k and rents now for 2850$ with 1000$ cash flow. In 2 years I will own it clear. I don't plan to refinance, the cash flow of 3000$ is what I seek. There is no need to keep chasing volume in assets, I have 2 other sfh in folsom that will be paid off in 10 years. Cashflow is not king, debt free with high quality growth assets is the king.
That's quite a number of real estate transactions. On the Cleveland properties are these Class C or D when you said tenant class isn't appealing anymore?
I just purchased a Class C potentially moving up to Class B SFH in the Indianapolis area. It's listed for rent by my property management team. My other 3 properties are Class A (two SFH, one in Bay Area, one in very nice Indianapolis suburb with great schools) and multi-unit in Bay Area (with co-investors). I'm not sure if I made the right move by going Class C but I can't give that house back to the seller lol...There's no Class A property anywhere that I've found that will positive cash flow or even break even (meaning rent covers mortgage PITI, not counting vacancy rate, capital expenses, or repairs)
I don't think I should 1031 exchange the Class A Bay Area SFH to buy 5 to 20 Class C properties in the Midwest (or anywhere out of the Bay Area like Central Valley or Stockton. That was the recommendation by a few investors. That seems like a huge headache. I'm at loss of what to do so I'm not buying anything for now until the Class C house gets rented out and put my money into index funds and a 3.8% premium savings account.
Agreed to not Exchange your Class A in the Bay area if you are in it for the long term! More equity and less headaches!
If you can keep it great. If you think the money would be better used elsewhere sell, OR you can refinance the property and rent it, using the new pulled-out cash to buy anither property that you an LTR or STR or live in it, not sure what your plans are.