Numbers first:
Market Value: | $235,000 to $245,000 (recent list estimate from our realtor) |
Original Purchase price: | $177,000 |
Original Mortgage Amount: | $168,150 |
Interest Rate: | 3.5% |
Mortgage Term: | 15 years |
Term remaining: | 12 years, 7 months |
Mortgage Remaining: | $147,123.21 |
Gross Rents: | ~$1,500/month |
Principal and Interest: | $1,202.07 |
Taxes and Insurance: | $567.22 ($69 of this is PMI, and will go away around October 2018) |
HOA costs: | N/A |
Deferred maintenance notes: | AC/heater are new. Patio needs work in the next 5-10 years. Roof will last another 10 years |
Other notes: | This home is in Austin, Texas, in case that makes a difference. |
Now, the story:
DW and I (currently 25 and 28) bought this house from a friend. She was in school, I was working full-time with a $50k+ salaried position. The house has four bedrooms, and we spent a while as live-in landlords, making $900-$1100 per month in rent and netting us a very cheap "rental" payment of $500-$700 per month, plus utilities.
Then our situation changed dramatically. Our monthly payment jumped by over $100 due to property taxes; we moved to a new state, and our net monthly property expenses (rental home in new state + mortgage - rental income) have increased by around
$600 per month.
I tried to re-finance into a 30-year loan to get a positive cashflow from the property (the monthly payment would have gone down to ~$1,300), but was denied; the last two years of income show my wife and I at a 52% debt-to-income ratio, which was 2% too much for the bank. Those years included a lot of repair expenditures (A/C and heater, primarily), which cancelled out the rental income.
Is it worth hanging on to this house? We can afford the payments, but it's putting a significant dent in our ability to make progress on savings. If I hold out, I'm going to keep trying to re-finance so that this property isn't a constant drain on our budget.
I know we could probably make a lot of immediate cash if we sold the house now, but the prospect of a steady rental income in the future is really hard to let go of. Should we sell and invest the profits? Should we refinance and take a smaller passive income? Or should we endure the big monthly payments for another 10-12 years to get the big passive income benefits in our 40s?
Thanks!