Hi everyone, my family and I are moving out of our current home and would like advice on what to do with it. I've been reading blogs and forum posts of what others have done and thought from our situation and some analysis, that selling is the best option, but a friend gave some arguments that we should hang on to it and rent it out.
Current Home Value: $300k just outside Houston, TX w/ tax rates around 3.3%
Mortgage balance: $174k @ 3.125% 15yrs fixed with 12 yrs left
Monthly PITI is around $2100
It's a 2009, 3 bed, 3 bath, 2680 sq ft home that could rent between $2100 - 2400 in our neighborhood.
I would have to refinance the $174k to a 30 yr, with a higher interest rate in order to drop my PITI to $1600. Otherwise, I would actually be losing money monthly with even the highest rent price.
My plan was to take the equity after all the costs (could be $100k+) and invest it in 2-3 $150k properties and rent those out. I'm looking at $150k homes in a neighborhood that rent for $1400-1600 or maybe even more. I would then hire a property management company to handle all those properties and be hands off. Online calculators I ran were giving about a $200/mo profit after all expenses. I figured that even 2 $150k properties at $1400/mo rent each would easily beat the rent from our home.
Friend though is suggesting that I keep the home and rent it out, then take equity out of the house, which would probably max at $60-70k and use that to buy 2 $150k rental properties. I would then own 3 properties, one is our house with a very low interest rate of 3.125% that would get paid off in 12 yrs and probably appreciate much more. I also wouldn't lose money from all the transaction costs involved with selling a home. I argued though that would mean I go back to owing more on the house by pulling equity, which would bring my monthly payments higher and then the rent is also low vs the home value (I figured I should follow the 1% rule). I also argued that I would lose homestead exemption so taxes will go up, and if I decide to sell the home later, would mean I will also get hit with taxes on the gains.
Anyways, I hope that's enough info but let me know if there's anything else that would help. Thanks!