First property, Keep or sell?

[Cade Speroni]

Hello all thank you for the help!

We just finished renting out our old house for the first year and cannot decide if its better to keep as a rental or sell, get the equity, and move that into a better cash flowing property and setting us up for a better spot financially. The house is in the far suburbs 2188 sq ft, 2 story, 4 bed 3 bath 2006 build, 2.5% interest, bought with VA loan 0% down. Purchase price $225K, estimated value $370k.

Total mortgage $1480

Property management fee $200

Additional insurance (home warranty) $80

HOA $37

------- Total cost: $1760

Rental income: $2000.

------- Net: $240 per/month

With this property, I REALLY love the 2.5% rate and know we will likely never see that again. We have a lot of sentimental love for the home. We are active military and will be moving a lot so the local property manager is a must. With the location we doubt we will be able to raise the rent, and not anytime soon. We don't have a lot of cash reserves to cover any emergencies that insurance may not cover, but there is a lot of equity in the home. We are thinking the best option would be to sell the house, get a large emergency fund set aside, AND have money set for the next property to fix and flip or just down payment to get a better cash flow (once rates come down some more). But with the 2.5% interest rate are we crazy? Is our risk tolerance just to low? 

[Brendan Mullenholz]

Quote from @Cade Speroni:

Hello all thank you for the help!

We just finished renting out our old house for the first year and cannot decide if its better to keep as a rental or sell, get the equity, and move that into a better cash flowing property and setting us up for a better spot financially. The house is in the far suburbs 2188 sq ft, 2 story, 4 bed 3 bath 2006 build, 2.5% interest, bought with VA loan 0% down. Purchase price $225K, estimated value $370k.

Total mortgage $1480

Property management fee $200

Additional insurance (home warranty) $80

HOA $37

------- Total cost: $1760

Rental income: $2000.

------- Net: $240 per/month

With this property, I REALLY love the 2.5% rate and know we will likely never see that again. We have a lot of sentimental love for the home. We are active military and will be moving a lot so the local property manager is a must. With the location we doubt we will be able to raise the rent, and not anytime soon. We don't have a lot of cash reserves to cover any emergencies that insurance may not cover, but there is a lot of equity in the home. We are thinking the best option would be to sell the house, get a large emergency fund set aside, AND have money set for the next property to fix and flip or just down payment to get a better cash flow (once rates come down some more). But with the 2.5% interest rate are we crazy? Is our risk tolerance just to low? 

Don't let a 2.5% interest rate deter you from bigger better things.  It is tempting to only look at that aspect of the plan.  If you come across a good flip situation it might make sense to sell your home and go to a higher interest rate.  Run the numbers to see if it'll make sense to do this now or if you want to wait a couple years to get max value.