My wife and I have lived in our townhouse for the last 12 years. We're planning to move out of the area in the next 1-2 months but we're not 100% sure if the relocation will stick. We plan to keep our house until we know which way that will go. This would probably be 4-6 months but could be up to a year. We're trying to start a family, I'm FIRE'd and my wife works remotely, so we have great flexibility and are not inclined to rush the decision to sell. After we move, we'll be paying $1,450 a month (mortgage) for a house we're not living in. We're in a 15 year mortgage so at least a substantial part of that payment is equity. If we do come back, we like the idea of coming back to our townhouse because we really like the house/area and it's inexpensive to maintain, as opposed to trying to find a new area/house and not knowing if we will like either as much.
In the event that we don't come back we had planned to sell our house. Townhouses in the neighborhood are selling for about $250,000 and rents are $1,500-1,600, so it doesn't meet the 1% rule. Rent would basically cover the mortgage and that's it. We're not buying a house where we're moving (staying w/ friends, maybe semi-permanently) so I also like the fact that selling would free up almost $100,000 in equity that we can invest in after-tax accounts.
A neighbor a couple streets down needs to move because their landlord is selling the house. They've rented the place for over 2 years and appear to be good tenants. They don't have plans to leave the area and would like to rent a place for 2+ years if they can. The fact that I can walk into their house and see how it's been maintained over the last 2+ years and also the fact that I don't have to deal with a vacancy has me considering renting to them. A tenant would take care of the mortgage while we are still deciding on the relocation, though if we rent the house and decide we want to come back, we would still have to find a temporary place to stay until the tenant's lease was up.
I would only consider renting in this one specific instance because it's about as hassle free as it gets, assuming the tenant has taken good care of their current house and they're in good financial standing. If we don't come back, at the end of this tenant's stay we would sell. One potential downside to renting is an unknown future housing market. Townhouses in our neighborhood are hot right now so we would have no problem selling our house, assuming no dramatic market changes in the time it take us to determine if we're coming back. If we end up renting the house for 2-3 years, who knows if the market will be as hot then. Another potential downside to renting is the age of our home (19 years). It will need a new roof soon and the HVAC systems will need to be replaced at some point. Continuing to hold the property only increases the likelihood that we'll pay those costs, and I would not expect to receive anywhere near full value on those costs during a sale.
On the financial side of things, we gain just over 10k per year in equity, thanks to the 15 year mortgage. If we took our current equity (~100k) and invested it we would need about a 10% return to match that. This assumes the tenant causes no degradation of property beyond the items we would already intend to touch up during a sale. Am I viewing this correctly? I'm not worried about "average" income being lower than full rent in this particular scenario because we have one tenant in mind and no intention to rent beyond that so unplanned vacancy doesn't really come into play.
We have no capital gains (bought for 260k, worth about 250k now) so we wouldn't lose a tax advantage if we moved out and rented for a while as opposed to selling fairly immediately.
Are there any other considerations I'm not thinking of in this particular situation?
