Rent or sell?

[Two Shoes]

I just closed on a new home I will own/occupy. Now I have to figure out if I should rent or sell my old home. HELP!

My mortgage with taxes and insurance impounded is about $570, I still owe about $63,000 @ 5.250% homes value is about $175k.

Rent in my market for older more distressed homes runs about $1100-1325.

Say I get it rented for $1200, pay water, trash (about $50 a month) and my mortgage. I'm left with $580 to do what I please, right?

I mean, I could even refi and get my mortgage to stupid low numbers.

I also like the idea of selling it and throwing about 100k into say VTSAX which is up 13.27% over 1 year.

I'm guessing everyone here will scream rent.

Please help me out with the numbers or things I'm not thinking of.

[marty998]

P part of your PITI is not an expense (just swaps cash for equity in your property), so the numbers go further in your favour.

And just because VTSAX is up 13.27% in 1 year doesn't mean it will do the same next year.

I would keep it, but I don't get those sort of cash flow returns on real estate here. I'd be tempted to buy a few more over there :D

[Two Shoes]

Thank you for your input.

[Another Reader]

Most in the business of owning rentals will tell you to sell.  After vacancy and collection loss, operating expenses, management and capital expenses you might break even with your current mortgage payment.

[SwordGuy]

I'm left with $580 to do what I please, right?

Nope.

That unit will be vacant some of the time.   You will still have to pay the mortgage and other bills.
So, if you think it will be vacant 5% of the time, you need to set aside 5% of the gross rent to cover that in the future.

Each and every day there are multiple items wearing out a little bit more.  Eventually they will break and have to be replaced or repaired.  You will need to set aside money that will be used for a new roof, new paint, termite treatments, new water heater, new hvac system, etc., etc.   Depending on the age of the house and the key items in it, that might range from 10% to 20%. 

And you will need to ability to pay for a $5000 roof or hvac system BEFORE you actually set aside enough to cover it because Murphy loves landlords without a repair stash.

[patrickza]

The historical statistics in most cases will favor the sell and invest course of action. That's also the one I would go for in your case, not only for the potentially larger reward in the long term, but also because renting is work! Lots of maintenance, risk and dealing with annoying issues just isn't worth it in my opinion.

Others are happy to do the work, and have built up large RE investments, but I don't envy too many of them.

[Two Shoes]

Thanks again for your input.

I think I'm going to try my luck at landlording... for now.

[fishnfool]

I would lean towards keeping it rented, but get that interest rate lower right now if you can. You should be able to get it down closer to 4%, maybe even lower if you can refi before you move out, refi it as a primary home

[Two Shoes]

I would lean towards keeping it rented, but get that interest rate lower right now if you can. You should be able to get it down closer to 4%, maybe even lower if you can refi before you move out, refi it as a primary home

Damn, I should have done that.

[Ensign1999]

You may still be in luck even if you have moved out.  I just refinance one of my rental properties down to 2.625%.  I paid about 1.6 in points to get it down to this rate, but because the plan is to keep the place long term then buying points made sense.  In the end, the refinance will end up saving me about 20-30k depending on what I end up doing with the monthly savings.

Not advertising them as I'm sure there are quite a few good outfits out there to go with, but you can at least get a ballpark idea of what a refi would cost at www.aimloan.com.  You can put in your numbers, location, your rough credit rating, and that it is an investment property on their site and it will return the rates they are offering.

Good luck with all