Keep Primary Residence vs Sell?

6 Replies

I bought a house about 2 years ago. We have two small kids (2 yrs and 10 months) and the school district in our area is not great at all.

We are thinking about moving to a better school district within the next year or two before the kids need to go to school. The homes in those areas are obviously a bit more expensive since the school district is better. 

I don't think my house will be a very good rental. 4 beds/2.5 bath, 2,200 sq/ft and rent prices are approximately $2k-2.2k for our area for this type of house. Rent of $2k would cover mortgage, property taxes and insurance but no excess cash flow. So in my mind, that is money NOT well invested. Ie. No return (Apart from principal pay down).

Do I keep the house or sell it?

I was thinking of maybe keeping it at first until we have bought our other house and then trying to rent it for a year or so and then selling? 

Any suggestions? 

Keeping it allows us the flexibility to sell it on our terms instead of being rushed/forced to sell which is never good.

It is not a good choice as a rental and for that reason alone should be sold. There is no advantage to holding a money pit that will only be a albatross around your financial neck. Unless you are already filthy rich and have no use for your money.

A few questions to ask yourself:

  • How much equity is in the home?
  • How much cash would you receive at close if you were to sell?
  • If you sell the house, will you buy another investment or use the money to buy a new home?

For example, I recently moved to Tampa and had to decide whether to sell our Cincinnati home or to rent it. We would cash flow a few hundred bucks a month after PITI and water. We had about $50,000 to $75,000 in equity. But the market was slowing down and we figured we would be able to sell it for higher a few years down the road, so we held. Now, I think we will hold onto it indefinitely and only sell or tap into the equity if we need it (i.e., we have a deal identified and cannot take it down with our current savings).

I hope this helped!

Keep in mind there are far more expenses on a rental than mortgage, taxes and insurance. Legal, vacancies, evictions, capitol expenses, routine repairs, accounting, tenant turn over prep, management. You will also have to do a renovation before you sell someday since tenants can be very abusive to a property. To sell as a SFH to a home buyer will require time and money to prepare for market.

You will lose money if you hold unless your area has above average appreciation and the markets do not drop.

I was debating the same thing about a year ago when moving from my house. I think the numbers you describe are very similar to my situation. I hadn’t bought the property as an investment. My wife and I bought it for a home. So the numbers didn’t work that well and I realized I was trying to force the situation to look appealing. But looking at it from the perspective of “would I buy this house to rent it out if it were being sold by someone today” gave me some clarity. 

We decided to sell. I took some of the money from the sale and bought an investment property where the numbers made sense from the beginning. 

Hope that helps. Good luck. 

It really depends on your financial situation and if you can buy your next property while holding onto the debt service. How much did you put down or into this property?  If you look at it as an investment and look at the Cash on cash return 2k a month might be worth it. Yes you might break even and may have to at times come out of pocket each month but you still receive rental income that is someone else paying the property off for you. I personally like holding everything as rentals but I try to go in with as little cash as possible so my return is higher. Do you plan on self management or hiring a property manager?