Sell or rent my SFH in NE Dallas?

Question

My primary residence is an SFH at 3.125% in the Lake Highlands neighborhood of Northeast Dallas (75238). Bought in 2020 right as lockdowns started. Mortgage, maintenance and tax is about $3k/mo, no PMI, so pretty cheap by today's standards. Richardson ISD too, so desirable school district when compared to DISD, but inside the 635 loop, so technically Dallas.

My wife and I are considering upgrading homes. She really wants a pool and the backyard is a bit too small for a decent one. However we're seeing some pretty severe softness in the market developing over the last 3 months here in the Lake Highlands neighborhood. Lots of refurbished homes have hit the market and don't appear to be moving at all. Not sure if it's bad flips, interest rates, or a glut on the market. Only shining beacon is that homes that have not been refurbished seem to move fast, which is exactly what we have. In our 6 years here, we have only added a gas line for the kitchen, put in wood flooring throughout, and added a tankless water heater. Otherwise it still feels like the 1990s at home, even retained the mobile-home-ish cheap wood panelling. Seems ripe for a builder if they want.

My wife thinks we could get $400-$500k in equity if we sold it, but then we gotta live somewhere. And I'm not so sure it would sell fast. Our dream house hit the market but means we'd be pouring all that equity right back into the new home. Right now, the plan is buy the new house with a bridge loan downpayment ($1500-ish a month) and hope our current house sells quick so the bridge loan doesn't cost us too much. Or we do contingent since the market is so soft. They actually already dropped the price on the new home.

Alternative plan is we rent it out, say at around $3500 a month. There doesn't seem to be a ton of rentals in the neighborhood, and not sure I want to take on a 3rd job, but it'd be doable.

Or wife is sad, we let the dream house go, and I put in a smaller pool at home, looking at around $70k for the whole backyard plans that we'd drawn up with an architect about 2 years ago.

Thoughts?

LaTarence Dunbar · Answer

i’d be careful about giving up that 3.125% mortgage without running the numbers first. With that rate and the equity you’ve built, there may be a middle ground between selling and keeping the house strictly as a rental.i’d look at the new home purchase, the equity in the current property, and the actual rental cash flow side by side before making the decision. A short term bridge/equity strategy could potentially give you more flexibility while you decide whether to sell or retain the existing home. If you’re open to it, I’d be happy to take a quick look at the numbers and see which structure makes the most sense.