Sell or rent

[Samuel Coronado]

I have a 5 bed/3.5 bath brick home in Madison, AL. 4100 sqft on a VA loan at 6% with a remaining balance of $404,000 roughly; 28.5 years left. Current mortgage is $2,850, but will be coming down very soon to $2,600 thankfully. Insurance fell dramatically since a new roof was put on and I switched carriers.

I am at an inflection point where I need to decide if I should try to sell or rent it due to possibly moving for a job change. 

If I sold, I think it would be by a hair that I can offload the property for the balance despite a tax value of $440,000, but it would get it off my books completely and free up my VA loan to purchase again.

If I rented, it would conservatively go for roughly $2,500 a month. I did a test to see interest at $3,000 that got some good candidates, but didn't take them through the whole qualification process because it's not ready to rent yet. 

So those are kind of my options- rent at a loss or sell for the balance. We talked about an aggressive paydown at a rate of $5k for the next 6 months to make the deal sweeter for the next person, but renting it would be preferable to that I believe since I can get a higher return on smaller development projects at a burn rate like that. 

[Nathan Gesner]

Quote from @Samuel Coronado:

Keeping it is a bad idea. You have to account for ALL expenses.

Let's pretend you can rent it for $3,000. Your mortgage is $2,600. That leaves $400 to cover taxes, maintenance, vacancies, etc.

Now, let's pretend ALL your expenses come to $2,600 and you have $400 left over. One month of vacancy will cost you $2,600 + $200 utilities. That one month of lost income will take seven months of cash flow to recover. What if a tenant fails to pay rent, leaves $2,000 in cleaning and repairs, and it takes another month to rent? That's two months of lost rent and utilities ($5,600) plus $2,000 in cleaning/repairs for a total loss of $7,600. It will take 19 months of cash flow to break even.

This doesn't account for any maintenance issues or a really bad renter. I think you would be wise to sell and use the VA loan for your new home.