I may be moving to Houston soon for work. I am 50/50 on whether I should sell or rent my house. I flip houses part time, and selling my house right now would probably net me about 40k. I don't "need" the money right now, but I am doing the math with the rental option and I feel like I could net about 100k by renting out and selling in 4 or 5 years, or just get my down payment and change back and selling it. Numbers below. I do not own any rentals but I think I might want to pick up a few this for the passive cashflow. This seems like a good rental deal. What kind of tax benefits am I looking at? And do you think this is a good deal? The house is fully functioning, pretty much everything is brand new now. Any advice would be much appreciated.
Purchase-183,000 (appraisal came in low so we had to renegotiate, so I got a good deal and put more down, was in contract for 202,000)
Could sell now likely for 190-205,000 without an agent
Mortgage balance 147,000
Monthly payment: 1,030
Rental market value: 1600-1800 (have confirmed this with several agents. There are zero homes for rent in the area, as I live in a very good school district, so could put a renter in there very quickly.)
Sounds like renting is the way to go.
You'll be able to take depreciation and deduct any maintenance costs you incur, as well as any costs for marketing the property. I believe you can also deduct the mortgage and insurance as operating expenses, but I would check with your CPA on that one.
Your area sounds like it has a lot of appreciation potential, so I would ride this next wave and sell when the market is really hot.
If you are moving out of town and rent, you probably need a local property manager to oversee your investment- add 10% to your expenses (less if possible) or you need to set up the sub contractors for maintenance and such.
Remember - there is a rehab cost after you rent to put the house back into market ready condition. Figure what that may be- new carpet or flooring, doors, paint and countertops- that number can be big depending on what condition your renters leave it. Maybe a lease2own or a option4deed is possible??
Just another opinion but If it was mine I would hold onto it & rent it out. If you really needed the 40K equity you could always refinance. Also your cashflow would be almost tax free as you get phantom depreciation on real estate income. And at this rental price point and in a good school district there's a good chance you'll be able to find a quality long term renter.
Consider capital gains. The way I understand it is if you live in a home for 2 of the past 5 years it's considered primary. So in 3 years from now you'll reach the threshold where selling before that date you'll pay no capital gains, sell after that date and you will.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.