We currently have a mortgage on our house with a little over $4k left. We are buying a new house (with a mortgage, 80% LTV financed at 2.875%, 15 year fixed). We bought the house for $120k in 2012.
The old house needs a new furnace, central air conditioner and a basement leak sealed, and would cost around $5-6k to remedy everything. Property taxes once we lose our homestead exemption on this property will be around $4k/year. We've been told we would have no problems renting for $900 / month and we think we could probably get around $1100 / month in our market.
My husband is in favor of renting while I'm leaning against renting purely on the merits of the house sale price vs what we can rent it for, e.g. if rental price / our sale price > 1%, it is a good deal, otherwise it is a bad deal.
Our current house that we could probably sell for $120k, of which we lose $7.2k to a realtor and another $2.3k to the sellers portion of closing costs in our area (transfer taxes and 1 year of owner's title insurance). This would net us $110.5k, assuming it sells at $120k, which neither us or our realtor is confident of.
To keep the house will cost us $5-6k up front for HVAC updates and fixing a minor basement water intrusion. We'll spend $4k/year on property taxes. We may spend 10% on property management but we can probably try to rent it ourselves. Until October we pay $661 / month for the mortgage, a smaller November payment and then the loan is payed off. If we look at May 2016 - May 2017 our costs to own the property are around $14k. Our potential rental income, if continually occupied, ranges from $10,8k to $14.4k (900 to 1200 / month, no property manager). This means, at best, the first year is a wash and realistically it is a loss. In subsequent years our costs go down to $4k / year fixed (taxes) plus a maintenance budget vs 10-14k rent, yielding a decent profit.
I also don't like having the cash locked into this house while paying a mortgage on our new house.
So my question is then, sell or rent? Is there anything in our reasoning that I've overlooked? Is the first year loss "worth it" in the long run? I would still like to get into the rental property game but with homes more in the 70k-80k that you can potentially get the 1% or slightly (and without basements which seem to all have a costly problem at one time or another) . We might not do that for another year or so and this in a way would be a way to learn.
What are your thoughts, anything that we are missing?