Author Topic: Reader Case Study - Sell or Rent First House? First Time Poster...  (Read 848 times)

tominva

  • 5 O'Clock Shadow
  • *
  • Posts: 1
Hi MMM Forum,

This is my first post. I am moving from my current house to a new house, and I have always planned to sell my current house after moving (too much hassle to make new house offer contingent on existing house). I have never wanted to be a landlord or own rental property. However, I am wondering if I am passing up a great opportunity. If I rent my house out for $1,500/month, I would be cash flow positive ~$700/month (not counting maintenance). On the other hand, if I had my home equity (~$150k) in cash, I doubt I would buy this house for $250k to rent it out for $1,500/month. But does my great PenFed 2.5% mortgage play into this? I don't know.

Would love to get anyone's advice on how to think about this. I am leaning heavily toward selling. If I sell, I will do two things: 1) pay down new house mortgage so my monthly payments are close to existing monthly payments 2) invest the rest in index funds in brokerage account (I'm already maxing out all tax-advantaged accounts).

Market Value: $240K-$250K
Original Purchase price: $210K
Original Mortgage Amount: $129K
Interest Rate: 2.5% 5/5 ARM from Pentagon Federal Credit Union
Mortgage Term: 30 years
Term remaining: 27 years (2 years until ARM can reset upwards - max is 2% to 4.5% for next 5 years)
Amount remaining on mortgage: $84K
Gross Rents: $1500-$1600
Principal and Interest (the P&I of your PITI - should match with the above info): $509.71
Taxes and Insurance (the T&I of your PITI): Tax: $200/month. Insurance: $16/month (not sure if this would go up if it's not my primary residence)
HOA costs: none
Deferred maintenance notes: Need a new roof in next 2-3 years ($5k). HVAC probably in next 5 years ($5k). water heater next 5 years ($1k). no other major maintenance - house is brick, windows are new, appliances are new.

Anything else special or unique in regards to the numbers of the property (not the property itself; things such as city assessments, back taxes, special costs due to unique features of the property, etc. etc.): no
« Last Edit: April 13, 2016, 08:26:24 PM by tominva »

former player

  • Walrus Stache
  • *******
  • Posts: 5912
  • Location: Avalon
Re: Reader Case Study - Sell or Rent First House? First Time Poster...
« Reply #1 on: April 14, 2016, 05:01:31 AM »
If your mortgage is for an owner-occupier its terms might be changed if you turn it into a rental.  Check the small print.

You have $11k in known maintenance costs in the next 5 years, which is 25% of your net cash flow.