Rent or Sell

[Michael Pannacciulli]

Hello - I have a property that is a second home in PA that is a second home.  Never rented the property.  My plan has been to sell it (it's paid off) and use that as seed money to invest in TN.  I listed it just after labor day and have only gotten one low offer.  

My question is should I rent this place instead, put it under an LLC, and use the equity as down payment instead to chase my aspirations of buying for long term renting in TN? Or be patient, stay the course perhaps wait till spring and sell it maybe at a lower price than anticipated?

Thanks,

Mike

[Ricardo R.]

@Michael Pannacciulli given the numbers you provided, you wouldn't be able to withdraw much and still make your current 2nd home cashflow. Are you sure $800/mo. for a 2BD (3BD non-conforming) in that area is accurate?... seems low especially considering the upgrades you mentioned. 

But.. proceeding with your numbers and assuming that the going rent is $800/mo. then the most you would be able to withdraw is $50,000 before breaking even (that's on a 30yr fixed at 7.9% and accounting for $2,836/yr. taxes, $1,000/yr. insurance, 5% vacancy and @ $800/yr. capex/maint. - which is low ) -- you would cashflow @ $10/mo. if the assumption numbers are remotely accurate. 

If you can rent it closer to $1,100/mo. then you would be able to withdraw @ $90,000 before breaking even by applying the same criteria. But it will be hard to find a lender that would give you a 30yr. fixed on such a low amount loan (both $50K and $90K)

Just for comparison if you held it and just rented it for $800/mo. you would cash-flow @ $659/mo. 

I'm assuming you listed it for @ $200K? --- So lets assume you sell it @ $185,000 and that you would use a relator then, less 7% in commissions and fees, you would net around $170K-$172K 

The questions are 1) How much are homes in Tennessee in the area you are looking? and 2) How much can you rent them for? and 3) Why are you selling the one in PA?