Last year I bought a single family home in my area. This was a so reheat premature decision as I hadn't done enough reading about real estate investment or frugality at the time. I am now in a position where moving for work is almost inevitable. The question is: do I rent or sell? Reading here and a bit at biggerpockets has helped give me some idea of what to consider, but I would like to pose the question to the members of this board for additional input. Here are the specs:
3 Bed, 2 Bath, .3 Acres
Initial Loan Amount: $221,500
Remaining mortgage balance: $218,500
Percentage down: 0% (yeah, PMI is a PITA)
Rate: 3.875%
Monthly payment + Escrow: $1350
Current ballpark Value: $223,000
Built in 1996, turnkey condition
As far as what I could rent it for in this area I believe that $1,800 would be my absolute upper limit. More likely to get $1,600 So given all that, here are some of my initial thoughts / options:
1) Rent it for a year so I don't have to pay extra taxes on the sale, plus there is the possibility of appreciation in that time frame.
2) Convert detached garage into ADU to get additional rent and get closer to that desired 1% rule. May not be possible due to zoning and would cost more capital upfront to renovate.
3) Sell it now, take the tax / fees hit and consider it a somewhat costly life lesson.
4) Rent it for the long haul with the understanding that it isn't the most efficient use if capital.
5) Drop some cash into it now to pay down 20% to get rid of the PMI and rent it with a greater degree of cash flow from it.
Those are some of the most prevalent options that come to mind. Regarding #4, I need some help understanding the implications of this. Let's take the lower end of the rent and assume I decided to rent long haul for $1,600 per month, "netting" $250 a month. Assume I am able to do this over an extended period of time. The occupancy rate in this area is one of the highest in the nation, so vacancy is real, but minimal. Since I put 0% down, after 30 years of this wouldn't I theoretically have an asset producing cash flow that someone else (my renters) bought for me? I realize that repair expenses and vacancy issues are going to gobble up most if not all of that $250 per month, but if I could even break even wouldn't it be a net benefit in terms of gained equity? I feel like I am missing something. Plus, once I am 20% in I can get rid of that nasty PMI, gaining me some additional al revenue. What am I not seeing?