To sell or rent my AZ home? - Please share your opinion

General Landlording & Rental Properties
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To sell or rent my AZ home? - Please share your opinion

Jeff Kathwell
Member since 2021 · 1 post · 0 votes

Hello,

I am really torn on what I should do and hoping to get some input from others regarding my specific situation on if I should sell or rent my 1,845 sqft home in Peoria AZ (85382). Here are the main details I believe you'd need:

- Purchased 1,845 sqft home in 2012 for $180,500
- Total monthly mortgage payment: $988, have about $90,000 left on my loan
- Rents available in neighborhood with similar sqft: $1800-$2200
- Sale Comps in neighborhood for same style home: $450,000-$500,000 

I am currently looking to purchase a new home and would not need to use any of the equity in my current home for the down payment. I have had some experienced real estate pro's tell me that I should sell the home because it would take a long time renting the house to make this amount of profit if I were to sell, and I would not need to pay any capital gains. Then others have said to rent because the home is in a great area and being a landlord is a great way to build wealth. 

I hope I provided enough details to get some input, I really appreciate it. It's a big decision.

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Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
5y

@Jeff Kathwell How much experience do you have? What type of investor do you want to be? 

Obviously you're in a great position and lucky to own property in 2021. Selling the property is the easiest route to take. The big thing you're missing here is actually running the numbers. Without an ROI or COC estimate the decision to sell or not becomes emotional. You need to get out of that mindset if want to continue investing and holding rental properties. If you're happy with the cash-flow (looks good from a quick glance) HOLD it. If not and the property has foreseeable maintenance SELL.

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  • Jaron WallingPro Member
    Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
    5y

    @Jeff Kathwell How much experience do you have? What type of investor do you want to be? 

    Obviously you're in a great position and lucky to own property in 2021. Selling the property is the easiest route to take. The big thing you're missing here is actually running the numbers. Without an ROI or COC estimate the decision to sell or not becomes emotional. You need to get out of that mindset if want to continue investing and holding rental properties. If you're happy with the cash-flow (looks good from a quick glance) HOLD it. If not and the property has foreseeable maintenance SELL.

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  • Justin Phillips
    Lender · Phoenix, AZ · Member since 2018 · 440 posts · 256 votes
    5y

    @Jeff Kathwell Those numbers sound like that property would make a great rental. However, it sounds like you would be able to make that money work harder elsewhere. At that point, it really comes down to preferences. If you're looking to get your feet wet in landlording, or expect to get some further appreciation, it might be best for you to rent it. 
    If you're simply looking to make your money/networth work as hard as possible for you, it'd be a good time to sell and deploy the earnings elsewhere. 
    At the end of the day you're in a great position! Look at the numbers with all expenses included(capex, vacancy,etc.), then make your decision from there. 

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  • Audrey L.
    Real Estate Agent · Dallas, TX · Member since 2020 · 13 posts · 10 votes
    5y

    Sounds like a great time to sell and cash in on some big equity...use it as a downpayment for several more $180k properties (if you can find them near you) and rent those out. 

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  • Perry Pelitera
    Investor · Queen Creek, AZ · Member since 2015 · 13 posts · 7 votes
    5y

    Depends if you want to be an investor. If you do want to invest, what type of investor (i.e., buy and hold, rent to own, BRRRR, etc.) do you want to become. The proceeds could be used for other investments that are more aligned with your goals. There are plenty of exit strategies to utilize.

    If it is to become a rental - who will manage? Are the mechanical system in stable condition? Is the property structure sound? Do you want to be a landlord?

    You could rent to own - rent at market rates and have tenant buy an option to purchase the property in the future at preset amount. Rents are just rent and monies are NOT held for future purchase. 

    Just sell the property and use the proceeds for other investment goals. 

    All of these have tax consequences and you should consult your accountant about how to minimize liabilities. 

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  • John Thompson
    Member since 2021 · 1 post · 0 votes
    5y

    Jeff, Congratulations on being in a good position either way you go. If you decided to rent your current home you may want to consider refinancing and pulling out some equity.  You could pull 70% out leaving 30% getting a 30year fixed rate mortgage.  Do this refi before moving to get the best terms on your primary home.  The benefit is that you get tax free money out of your home, and have your tenets paying the mortgage back with lower inflated dollars.  Pushing the mortgage out 30years at a low fixed rate will help you cash flow.  
    Make sure the refi does not prevent you from qualifying on the new home purchase.   

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  • Thomas Corley
    Real Estate Agent · Phoenix, AZ · Member since 2018 · 127 posts · 62 votes
    5y

    @Jeff Kathwell It definitely depends on the home and condition it’s in if there is about to be a lot of deferred maintenance coming up (Roof & AC) I Would look at selling.

    If not sounds like a great rental and cash flow! You can also always pull money out if needed for other investments but sounds like a great rental!

    Good Luck!

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    4y

    @Jeff Kathwell

    Items to consider when selling a house
    You may pay around 7% to 9% of the value of the home in fees(Realtor Commissions, Title costs, Title Insurance, Stamps etc).
    The sale may also result in taxes(Federal taxes + State Taxes).
    You might be able to avoid taxes by doing a 1031 exchange or QOF Fund.
    You no longer have an asset that can potentially provide you cash-flow / appreciation.
    Do you think you can make up the 7% - 9% in fees + Taxes over time by buying another property?

    Items to consider when you rent the home
    You will collect gross rental income and pay for expenses(Insurance, RE Taxes, Interest, Repairs, etc). Hopefully you are cash-flow positive on the property.
    The property will gain or lose value over time.
    Are you happy with the cash-flow and appreciation? Keep it
    Do you think you can find another property that will Cash-flow / appreciate better and also cover the 7% - 9% fees described above? Sell it

    [email protected]917-280-8544
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