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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: PVkcin on May 17, 2018, 02:33:50 PM

Title: If we move - Sell our current home or rent it out?
Post by: PVkcin on May 17, 2018, 02:33:50 PM
My family & I are thinking of buying a new (new to us) home (in our same city). I知 trying to figure out if financially speaking we would be better off selling our current home (We currently own), or keeping it and renting it out.

We conservatively could sell our current home for about $132,000 (sell for 140k minus the realtor fees) if we sold it right now. We owe $32,000 on it. (We would come out with about $100,000 cash if we sell it). 

If we rent it out and become landlords, based on the research I致e done, we could rent it out for about $1,350 / month.  We have never had a rental property before, so I知 not sure what other numbers would be pertinent to the discussion. Feel free to ask if there痴 something I知 missing.

Here are a few more numbers that may be relevant:
We bought the home for $108,000 in 2012. We have 5 years left on the mortgage and we pay $900 /month (that includes principal + interest + taxes + insurance).

The house was built in 1958. It has an older furnance/AC unit that seem to be working fine but they look 15-20 years old. The plumbing is about half the original plumbing and half updated by a previous owner. We have had some plumbing issues and have had a plumber out about once per year since 2012 (maybe 4 times since then) with an average bill of around $600 each time. It has a new roof, updated kitchen and updated bathrooms (minus the plumbing).

I知 not great at fixing things nor does fixing things come naturally to me. If we rent it out, when the tenants call with something broken, I would most likely be paying someone to fix it. (This is why I lean towards just selling the house and taking the $100,000 rather than renting it out - I知 also not thrilled about the idea of a 菟art-time job if the tenants are calling me). We would just be moving a couple miles away, so I would be within a 10-15 minute drive from our new house to the old house, for what it's worth.

We池e just trying to see if we池e missing something before we make the potential decision to just sell it and move on. Thanks in advance for any insights you have into our situation.
Title: Re: If we move - Sell our current home or rent it out?
Post by: GizmoTX on May 18, 2018, 07:54:19 PM
Sell. If you rent it instead of selling, you will lose the ability to pass on any gains tax free.
Title: Re: If we move - Sell our current home or rent it out?
Post by: PVkcin on May 18, 2018, 09:31:51 PM
I hadn't thought of losing the ability to keep the gains tax free if we rent it. Thanks!
Title: Re: If we move - Sell our current home or rent it out?
Post by: PVkcin on May 19, 2018, 08:52:37 AM
New part to my question:

Is it best to only put the minimum down payment down on the new house (only 20% to avoid PMI), and take out the longest term (30 years)? When I say "best" I mean thinking of which options gets us to FIRE the quickest / which option gets us to freedom quicker.

Before I found the MMM community a few years ago, I was a Dave Ramsey listener. So I have that ingrained in my head to use the "paid off home mortgage as the status symbol of choice." AKA all debt is bad, even a house mortgage. So on my current home we had a 15 year mortgage (as Dave Ramsey recommends if you don't have the cash to fully pay up front) and I had been making extra payments towards the mortgage. That's my background. 

But after reading the forums here, I have slowly become mostly convinced, thanks to @boarder42 and others, that it seems it may be best in terms of getting to FIRE quicker, to take out 30 year mortgage (investing the difference of what we save each month because of lower payments). It's hard for me to overcome my ingrained Dave training that it could ever be good to take out a 30 yr mortgage. (scares me to think of still having a mortgage when I'm in my 60s in 30 years).

So if we were to buy a 250,000 house, before I would have put 100,000 down (or more if I were to sell stocks) to make the monthly payment less (and possibly would have done a 15-20 yr loan). Now I'm wondering if we should only put 50,000 downpayment with a 30 yr loan (and invest the other 50,000). Our monthly payment would be more, so it's hard for me to figure out the numbers as to which option gets us to FIRE quicker.

For the purpose of calculations, I am assuming an interest rate of 5% on a 30 yr loan (this is probably a little high but interest rates are rising and we aren't planning on buying for 6-12 months).

Anything else I'm missing in my calculations?
Title: Re: If we move - Sell our current home or rent it out?
Post by: boarder42 on May 20, 2018, 07:43:19 AM
Assuming you plan to live in the house 7 years the best thing to do is to take a 30 year and only put 20% down. A 15 year typically wind mathmatically over the first 6 years.