I'm currently taking a serious facepunch on living costs. Long story. I originally bought the house back in 2004, for 362K. It last appraised (for a refi) at 491K in the fall of 2013. The market has appreciated since, and is continuing to do so. Zillow currently estimates it at 558K. Bellevue has an excellent school district, there's lots of well-paying IT jobs, and I am in easy walking distance to parks, an elementary, and a junior high. It is a family/kid-friendly neighborhood. The house is built in 1956, six (mostly small) bedrooms (three of those in a daylight basement), 2560sq ft over two stories. There's 10K of deferred maintenance on the house -- new fencing, some minor roofing work. Otherwise, the house is a little tired, but absolutely usable. No HOA costs. I am living in the house currently, but it is just me and my dog. At present, I am in a 15y/3.875 fixed mortgage, with 282K/13.5y remaining (300K at refi time). All in, this is costing me almost 2700/month (PITI).
I am contemplating a refi into a 30y fixed. Let's say similar rates, 280K@3.8%, puts me at about 1750/mo PITI (1300 PI, 450 TI). From there, I can go one of two ways... I can continue to live there, now freeing up 1K/mo in cash. Or I can rent it out. Expected rent would be 2300/mo. Based on the fact that three of the houses within a block of me are renting in that range, it seems realistic. I would plan on being a hands-off landlord. Probably leave this in the hands of a property manager (I have a line on a very good one -- my good friends have six properties managed through them), and at least in the near future any money in excess of PITI and management fees would be directed into an emergency repair fund for the property, so at least for the first couple of years I don't think this would meaningfully contribute to my actual free cash flow.
Or I can just sell the house. The house is not appropriate for my needs. I would like a much smaller house, with a large outbuilding or detached garage. I can currently telecommute, though, being in IT, the immediate Seattle area is a great place for me, and I'm a long way from FI so I don't think I can hem myself in and move to somewhere with very low COL if it cuts into my earning abilities. I will have certain non-trivial expenses (child support) for at least another 11 years. I have ~25K of unsecured debt, which really, really needs to die, and I currently make 150K.
What say ye?