In a dilemma on whether i should sell or rent my current residence out and was hoping to get some thoughts from the experts.
I bought the SFH i live in 2 years ago. My total investment at the time was $50K, 20% plus closing and other costs. I recently purchased a duplex (closing next week) that I will have to move into for at least a year. The numbers on the duplex are solid. However i am conflicted on whether to sell the current house.
The mortgage on it is $1.1K and i can rent it out for $1.5K with the tenant paying all utilities. The way i see it, i will make about 4K on the house annually, which is an 8% return on my cash investment while accruing capital appreciation.
Alternatively, if i sell it i could make a a small (15K) profit and reinvest the 65K in another rental property.
Am i being foolish in leaning towards keeping it?
It sounds like you are forgetting to account for vacancies or any kind of capital expenditures. I think your actual cash on cash return would be much lower in reality. Check out some of the calculators and run your numbers a few times to get a more accurate picture.
Are you saying you can make net 15K profit on your 50K investment of your house and your accounting of having 65k also tells that, any mortgage is paid off.
Since it was your own residence then, you cannot actually put a cash flow statement on it. Nevertheless, you did improve your assets. Considering that and 15K being 30% profit(if thats the net), it may be a good deal to sell. ( Markets fairly better than last 2 years).
Having decided to sell:
If the house is all paid off, and if you are selling and can do owner financing and if you know how to go about, it will be the most profitable option, should you do it right, as you will also gain some interest over a period of time.
Thank you all for the comments.
Matt J. That was my thought initially , my leaning towards keeping it is driven by the fact that the market in my areas is really heating up and If after a year I decided I did not want to live in the duplex, I would either have to rent or shell out more ( capital and interest) to buy a comparable.
I have a conventional on the property, owner financing is not an option.
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@Satha Palani Was it the fictional Earl of Greystoke who said "never sell real estate"?
In this instance, I would suggest going with your instinct/s (they have served you well so far). If your instinct changes along the way, there will likely be very good cause.
The main thing is, you are keeping abreast of your circumstances, and continually canvassing your options.
You are primed to come out on top, either way! All the best...
If you will potentially move back after a year or so, the case for keeping the property is a lot stronger. You would be looking at least 15K in transaction costs - 6% commissions not counting holding costs, fix up costs or seller assistance.
One thing is to look at your tax situation and make sure you can benefit from the "paper loss" you will have on the rental from depreciation. In your situation I wouldn't worry much about the capital gains exclusion, it looks like it would only be less than 2%(the taxes) of the property value, and it is still an option(or at least partial) for 3 years.
One option might be to list the property as both a sale and a rental.
Thank you all for the perspectives. I have decided to rent it out and focus on the duplex for now. Which means, i will soon be introduced to the joys of being a landlord :)
I am reading up on it and wanted to see what your opinion was about keeping my personal contact details separate form the rental side of things.
In other words; should I:
1. get a DBA
2. rent a P.O Box
3. get a separate cell phone (google voice)
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