Author Topic: Moving closer to work, wahoo! Sell or Rent question on existing owned home  (Read 1281 times)

jwilliams0215

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  • WinningWilliams
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Going on 8 years now, I have commuted 30 miles each way to work. My wife just received a job offer general in the same direction (23 miles from our existing home). Our plan is to rent a place near her work (within walking distance) and then I'll continue my commute (cut at least in half if not by more). Her work is by the water in Florida so purchasing won't make sense with insurance costs, etc.

Now, we are really lost on what to do with our existing home:

It's a 3/2/2 in the suburbs. It looks like comparable properties are renting for $1,300 per month - $1,400 per month.
Purchased in 2007 for $190K, it is now owned free and clear. Zillow estimates $170K value, but I would assume more likely $160K and maybe netting $150K after selling fees / closing costs / etc. So it doesn't meet the famous 1% rule.

From a cash flow perspective (am I missing anything?):

$1,300 estimated monthly rent
-$225 - Property Insurance and Property Taxes (based on current numbers)
- $210 - Repair Fund / Reserves / HOA (which is just $155 for the year)
- $130 - Vacancy Estimate(?)   
$735 NET MONTHLY CASH FLOW

Other considerations:
Could be a nice home when we start our family (planning in 3-5 years) with a good school district and very proximate to family.

What would you guys do?

Homey The Clown

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If you base the rent on the $150K, you're looking at roughly 6% return, before taxes. I may be wrong, but taxes would be income, so 25% at a minimum. Now you're down to 4.5%. It seems like a good idea to sell at that rate. You're also forgetting that your taxes will go up with the loss of a homestead exemption unless you're planning on not telling the local tax assessor that you're living elsewhere.

jwilliams0215

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Great point about higher taxes excluding the Homestead Exemption. I'll have to factor that into the equation as well.

Won't taxes paid on the rental income be mostly offset by depreciation?

waltworks

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Depreciation has to be eventually paid back - it's just deferring taxes, not avoiding them. So I would not include that in your calculation.

That said, if you think you might want to live there again and you don't desperately need the money - just hold onto it. It's not an awful money pit at those numbers.

-W

Great point about higher taxes excluding the Homestead Exemption. I'll have to factor that into the equation as well.

Won't taxes paid on the rental income be mostly offset by depreciation?