I am purchasing a new primary residence soon. Sell or rent my current primary?

Question

We are purchasing a new primary residence in approximately 6 months. Should I sell or rent our current primary. Current home should rent for $2,500 per month. We owe $250k with a 3% mortgage and a HELOC for $150k at 10%. Home will sell around $425k. We currently earn $250k per year and have no other write offs, so I believe this would be a great tax strategy to create LLC for rental. But, we also have $200k debt beside mortgage and HELOC. Looking for pros and cons.

Jaron Walling · Answer

100% agree with @JD Martin. Without the PITI, estimated capex, repairs, vacancy, or PM we can't give great advice. These questions pop up all the time. If the intent mostly like years ago was to buy, live for a few years, and then hold as a rental the numbers should support it.

You make a quarter million per year with $200k in bad debt. Selling the house tax free and wiping that out would be a huge win. It's way more powerful than fixating on the 3% rate and justifying to hold as a rental. A small amount of CF isn't worth it for someone in this position.

JD Martin · Answer

The LLC is unnecessary just to have a rental. Quick mental calculations says you will take in less in rent than you are paying out on mortgages, not to mention maintenance and upkeep. Based on your limited info and your debt load I would sell.

I am purchasing a new primary residence soon. Sell or rent my current primary?

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