Author Topic: Sell or Rent Current House When We Move Up?  (Read 4119 times)

jbmatth

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Sell or Rent Current House When We Move Up?
« on: December 13, 2013, 01:43:29 PM »
Here is my situation, I bought the house we currently live in back in Aug. 2009.  Three months out of college thinking it would be all I would need, I was single then and am now married with my second child due in Jan.  It is a 3 bed 2 bath that I've put some sweat equity into.  I gutted the master bath and installed a tile shower and brought it up to date.  I put engineered hardwood floors in the entire house other than new tile in the kitchen laundry room that I did as well.  We have refinished all of the cabinets and painted the entire house on the inside.  We have talked about replacing the laminate counter in the kitchen with granite as well before we move.  I paid $93k with 3.5% down at 5.5% and owe $77k now the payments are $761 a month with $518 mortgage and the remainder for taxes/insurance.   The neighborhood we are in we are at the very top of the market with 1584 sq ft. and .37 acre lot.  The houses that have sold recently in the area are from $70K-$87k but are typically in the 1150 to around 1400 sq ft. with .2-.3 ache lot.  No house with over 1450 sq ft or over .31 acre lots have been sold and there are only a couple with the size house in the area and none with the lot size.  Zillow has the house at $104k but I know how inaccurate they are.  I think I could get around $1,000 in rent and maybe slightly more.  We will have the money together within the year to get a larger house with a 4th bedroom. (Wife's only request)  We could easily make the payments on both while living in the old house and renovating the new house, as the existing mortgage is only 10% of our take home pay.
So my question is do we rent the old house out, or sell?  We could have the PMI dropped sometime next summer once we reach 78% of appraised value (already verified this with the owner of the mortgage), but is $41 a month.  We could probably even refinance to a lower rate, but until recently all our extra money was put to pay off my wife's student loans. ($45k in just over a year thanks to my wife getting a great job compared to her old one!)  I don't think it would be wise to try to add on to our existing house as there wouldn't be any easy way to increase its size, and would be an awkward layout. 
As a side note we also have a $23k loan at 6.1% for her parents house that we don't collect rent on currently, long story, but I've come to terms with the fact that this may be a semi permanent expense until it is paid off.   I know I'm just rambling and may not be making this as clear as it could be.  Any advise is welcome.

willn

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Re: Sell or Rent Current House When We Move Up?
« Reply #1 on: December 13, 2013, 02:02:01 PM »
With student loans left to knock down, a debt you're paying for family, 2 small ones soon running around, I'm thinking sell.  The marginal return you might get renting isn't worth the hassle.  Put your capital into assets that are more easily managed on a website (mutual funds).

Clearly you're energetic and handy and get shit done but spend that energy on your growing family and new place and knocking down those ridiculous debts.

jbmatth

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Re: Sell or Rent Current House When We Move Up?
« Reply #2 on: December 14, 2013, 11:05:37 AM »
Thank you for the advice, to clear things up a little the student loans are paid off as of this past summer. Since the. We've purchased a "rental" for my in-laws, and owe on that as well as our current house. We also are saving about 20% of our income in 401k's and other retirement accounts. One other thing to note is we wouldn't be more than 2 miles from this house to our new one. (love small towns for that reason!) Also my father-in-law is retired on SS and could help during the day if something comes up while I'm engineering shit.

Another Reader

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Re: Sell or Rent Current House When We Move Up?
« Reply #3 on: December 14, 2013, 11:37:55 AM »
In your shoes, I would refinance today at the owner-occupied interest rate.  Your payment will be lower (lower balance, lower interest).  $77k at 4.5 percent means principal and interest is $390 vs $518.  Spend the next year building up a big down payment and funding you retirement plans/IRA's.  Once you reach the one year mark after the refi closes, start shopping for house number 2.  Rent out house number 1.  If the numbers work, buy another fixer as house number 2, then rinse and repeat.  After you buy house number 3, you will have two rentals, and a third once the in-laws move.  Meanwhile you will be funding your retirement.  Win-win.

Daleth

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Re: Sell or Rent Current House When We Move Up?
« Reply #4 on: December 14, 2013, 12:49:34 PM »
In your shoes, I would refinance today at the owner-occupied interest rate.  Your payment will be lower (lower balance, lower interest).  $77k at 4.5 percent means principal and interest is $390 vs $518.  Spend the next year building up a big down payment and funding you retirement plans/IRA's.  Once you reach the one year mark after the refi closes, start shopping for house number 2.  Rent out house number 1.  If the numbers work, buy another fixer as house number 2, then rinse and repeat.  After you buy house number 3, you will have two rentals, and a third once the in-laws move.  Meanwhile you will be funding your retirement.  Win-win.

I'm with you, Another Reader.

zinethstache

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Re: Sell or Rent Current House When We Move Up?
« Reply #5 on: December 17, 2013, 09:40:43 AM »
+1 Another Reader

That methodology has made alot of rich landlords:)

SunshineGirl

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Re: Sell or Rent Current House When We Move Up?
« Reply #6 on: December 17, 2013, 10:57:09 AM »
I agree with Another Reader, as well. You're correct in that already being one of the largest homes in the neighborhood, you wouldn't want to add on and hope to recoup that expense.

I wouldn't be in a hurry to move.

jbmatth

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Re: Sell or Rent Current House When We Move Up?
« Reply #7 on: December 19, 2013, 06:29:56 AM »
Question for Another Reader, waiting for 1 year after refi before we start shopping, is that to build up a down payment, or is that because of restrictions in the mortgage that would require us to live there for 1 year?  Also could we buy our next house before the year has passed and work on it before moving in after the year has passed?  Or do we need to wait at least a year before we contract on another house?  As for the in-laws moving out, I'm not going to hold my breath, I'm afraid that is a cost I'll just have to eat.

Another Reader

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Re: Sell or Rent Current House When We Move Up?
« Reply #8 on: December 19, 2013, 06:51:22 AM »
Your mortgage will likely require you to live in the house for a year.  Use the time to make repairs and improvements and to save up the down payment.  When you buy the next home, you will likely have to sign something that says you will occupy the property in 60 days.  It can be difficult to juggle the mortgages and tenants, but it's worth the effort.


fodder69

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Re: Sell or Rent Current House When We Move Up?
« Reply #9 on: December 19, 2013, 07:10:29 AM »
I agree with Another Readers plan. At times it can just seem like you *have* to move and once an idea like that is in your head it can be hard to get it out. But sometimes you just need to wait it out! I do wonder what the rush is, a 4th bedroom would be nice but you just paid off those loans so now would seem like a good time to catch up a bit. Refi and save some money. Don't do anything to the current house since it sounds like you'd price yourself out.

If you can afford to keeping it, it sounds like a great option for renting it out.

jbmatth

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Re: Sell or Rent Current House When We Move Up?
« Reply #10 on: December 19, 2013, 08:50:56 AM »
Thanks for all of the replies!  I'm working on a refi now and will let you know how it turns out.  We can easily afford to buy the next house in the range I'm looking and still make the payments during vacancies.  The only thing we would like to do to the house we are currently in before moving would be to replace the kitchen counters and some paint in the main bathroom along with doing some minor repairs to the laundry room where a past dog got bored.  All in it would take about $3000 for the upgrades and I'd do all the work except the counters, but would do the back splash.  It probably wouldn't pay back, but would be nicer for us to have than the terrible lanolin we have now.  The reason for wanting a 4th bedroom, or at least a place to put a 4th bed is for a guest area, I have a large family that come to visit often and don't want to have them stay in a hotel after they made the long trip to see us.  Then we could also use that space for a play room or office.  One more question, while saving for the next year, where should we park those funds for a better return than our savings account, and still have access to it when we need them?