Author Topic: Sell it vs. Rent it out?  (Read 1778 times)

Mill1549

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Sell it vs. Rent it out?
« on: May 04, 2014, 09:45:05 AM »
New to posting but longtime-lurker.
Here's the scenario--we have the opportunity to buy our dream house (a 1000 sq ft 1920 bungalow). We've been in our current house for three years, and thanks to a robust CA real estate market and a whole lot of DIY remodeling, have about $150-200k in equity.
Purchased for 170k 3 yrs ago. Refi'd 2 yrs ago into 30 yr @ 3.85%. We currently owe 123k. Comps put our market value at about 300-320k.
Our mortgage payment is $600 a month. We have student loans to pay off totaling about $25k and modest savings (not enough for another down payment). Also two kids to send to college in about 15 years. We are regularly contributing to retirement and our brokerage account. Husband will be getting a 30k/yr raise within the next 2 yrs.
Here's the question:
--Should we take out a HELOC on our current house house to make a down payment on the new one and make our current house into a rental? We could get $1600, maybe 1700 a month in rent. 
OR...
--Should we sell our current house, make a down payment on the new house ($50k-60k), pay off our debt, and invest the remaining?
I'm sure I'm missing some important information. Our main concern with turning our current house into a rental is not having cash on hand to make needed repairs to the new "old" house, and having too much money borrowed (HELOC, mortgage on rental house and on new house). PLUS the capital gains when we'd want to sell the house to pay for the kid's college. Or am I being too narrow in the uses for the rental house $$?
Thank you for any advice you may have!
« Last Edit: May 04, 2014, 02:23:58 PM by Mill1549 »

frugledoc

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Re: Sell it vs. Rent it out
« Reply #1 on: May 04, 2014, 10:39:20 AM »
Don't know.  I'm in a similar situation in the UK. With 260,000 pounds equity.

My mortgage is only 400 per month (200k mortgage)

Property would rent for 20,000 per year gross.

It's in London so I'm more worried about missing out on future gains and a house price crash doesnt really worry me as I don't feel it would really affect my finances.



hello867

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Re: Sell it vs. Rent it out?
« Reply #2 on: May 28, 2014, 02:57:02 PM »
I would sell it. Would not want to miss out on the ability to get those gains tax free.

waltworks

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Re: Sell it vs. Rent it out?
« Reply #3 on: May 28, 2014, 04:36:40 PM »
Miserable 1% rule failure. Causes you problems with moving to where you want to be and leaves you paying student loans...requires taking out a HELOC and associated fees/hassle, gains are tax free for a while thanks to 2/5 occupancy... wait, why is this even in question? Sell it yesterday and move on with your life.

-W