Rent or Sell primary residence?

Question

I plan on moving within 1 year and am leaning towards renting my current house out when I move, should I? I plan on buying more rental properties in the future. However, I didn't know if it would be more sensible to sell my primary residence and use that $ to put down an even bigger down payment?

My situation: I have 1 rental property now value approx $60,000 Mortgage payment including taxes/insurance $410. I collect $600 in rent.

My current residence just appraised at $81,000 and current Mortgage including T& I is $575 and based on comparable rents in my neighborhood I believe I could rent it between $750-800.

I have been saving for large down payment (approx 50% down) on a newer house within 1 year's time. Could I get some input on what would be a better choice long term- as I would like to have rental properties as part of my long term retirement plan.

Are these properties cash flowing enough or should I sell 1 or both and put down even more $ down or invest elsewhere.

Primary residence paid $63,500 6 1/2 years ago current appraised value $81,000

Current Rental property(wife's former house) paid $50,000 5 years ago market value approx $60,000.

Sorry this is so worded. Please let me know what other information I could provide in order to receive your best advice, input..   All comments, input, suggestions.. Greatly appreciated.

Thanks in advance.
Jason

Mark N.A · Answer

Jason:
            
            Read up on the "50% rule" on this site.  It's a simple calculation which will tell you pretty rapidly if you are cash flowing or not.

Not everyone agrees with it, but you won't go wrong following it.

Nick J. · Answer

just sub it to me and I'll take care of the rest ..................................................:-)

Greg Boots · Answer

Jason,

Under the new 121 rules you can still convert your primary residence into an investment property, then sell it two years later and still be eligible for your full capital gain exclusion.  Where you run into issues under the new rules is when the property is first used as an investment property and then converted into a primary residence.