Should I sell or rent my primary residence?


This week’s question comes from Dane through Ashley’s DMs on Instagram (you can find her @wealthfromrentals). Dane asks: should I sell or rent my main residence?

When you move from your current home to a new home, you have the option to sell or rent it out. While there isn’t one solid answer for everyone, you can Find out if selling or renting is the best option by looking at Your market and your specific financial situation.

If you’d like Ashley and Tony to answer a real estate question, you can post on the Real Estate Rookie Facebook group! Or give us a call on the Rookie Request Line (1-888-5-ROOKIE).

Ashley:
This is Real Estate Rookie Show number 70. My name is Ashley Kehr and I am here with my co-host Tony Robinson. Hi tony

Toni:
What’s up, Ash? How is it going on the east coast today?

Ashley:
Well. I got my purchases delivered just before we started. So I have a little snack here.

Toni:
What’s new with me, let me think. I think I turned down two offers in the past week. So part of being a real estate investor is not closing every deal, but we’re making progress. See what else we can find.

Ashley:
Yes. I made a foreclosure offer on Monday and they said, “Offers due by 3pm Tuesday.” So I get my offer and then they say, “Well, we got several offers. So send your best and last offer by 9:00 am the next day. ”And it’s like,“ Okay, that was my best offer. Or you just get us to resubmit. ”And they still haven’t accepted anyone. I guess there was someone else who was higher than me and they faced that person, but the person hasn’t accepted yet. So I told my agent, I said, “There’s still a chance.” It’s like in Dumb and Dumber. It’s like, “So you’re telling me there is still a chance.” Until then, they accept another offer. I will still have hope.

Toni:
There is still a chance. Yes. Well things are getting kind of crazy now. We even make a cash-only offer, but then they get someone else who is funded, but only more money. So it is what it is. You gain something, you lose something.

Ashley:
Yes. I also think that making two different offers is a great strategy for a beginner or investor. So if you are not sure if your cash supply is stronger. Or if the buyer actually wants more money, they don’t care if it is finances, put it both ways and make both offers, say, “Hey, I can pay you so much with a cash offer, right?” i can pay you so much vendor finance or i can pay you so much. If I can get a conventional mortgage. ”So that’s just a little tip for today.

Toni:
Man i love it That shouldn’t be today’s thing, but let’s start with some good knowledge for people. I love it.

Ashley:
So, let’s read today’s question. That was actually in my DMs on @wealthfromrentals. And this one is from Dane. So Dane said, “Hello, I heard your podcast. Good work. I have a question. I have my main residence, which I bought in 2017. I bought it for $ 89,000. Now it’s worth $ 210,000 to $ 240,000. Listed it in December, January, didn’t get the price I wanted. Now the wife and I are considering buying another house and renting out the current one. Just wanted some beginner tips on how to do this. Many Thanks. Yes. I owe $ 79,000 now. ”So that’s Charlotte, North Carolina, this market, and Tony and I don’t know anything specific about the North Carolina market, or Charlotte in particular. But what we’re going to talk to you about today is breaking down how you would actually go about it. Find out if you should rent it out or try to sell it.

Toni:
Yes. I think the first place I would start is to do a little market research. I don’t think Dane gave us the details about the property, like bedrooms and bathrooms and so on. But Dane, if I were you, just for example, let’s say this is a two bedroom, one bathroom bedroom. I would go out and find any comparable, two bedrooms, one bath, within 5, 10 miles or whatever, and see what these properties are renting for. I want to make sure they are comparable. If your property is like a C-level property, you don’t want to compare it to an A-level property and vice versa. And so you will definitely find something comparable. BiggerPockets, BPInsights, there you can get market rent data. There are other resources out there while BPInsights is a great place to start, but I think this will be my first step. Ash where would you go

Ashley:
Yes, I would agree with that. I would find and pull the comps for your region for the sale price and for the rental list. So Dane mentioned that he did not get the sale price he wanted for his property. So maybe pull a few more comps and see what price you could actually get or what offers you got. And then take a look at the market rents in the area. What could you rent it out for? So he asked for $ 210,000 to $ 240,000, it seems like he owed $ 79,000 on the property he was trying to acquire. So I’m assuming your mortgage payment is pretty low, or you may even have the option to refinance. Maybe you will pull some more money out of the house and you can even refinance that. So your payment is actually lower, whether for a longer term or for a lower interest rate than you may have received previously on the property.
So you want to take that market rent and see what you can get for it and make sure that all of your expenses are met. Will it cover your mortgage payment? Will it cover your property taxes? Does it cover your insurance? Any other expense you might need to maintain the property that a tenant wouldn’t cover, go around and find out. What would that number be? And will you be able to generate cash flow from this property? I don’t want you to rent this property out and make losses. Maybe that’s the only option if you can’t sell it for what you want. What do you think of this Tony?

Toni:
Yes. So it was a tricky part too, wasn’t it? We are about to sell a property in Louisiana that is losing money. It’s in a floodplain, our insurance premium has soared this year for some reason. We looked around and that’s just the common rate to actively lose money on that property each month. So let’s try to sell it as soon as possible.

Ashley:
Hello. Did you hear that? Tony has a property for sale.

Toni:
I don’t know if other investors will want it. We are trying to sell it to some people who live as a primary residence. Just because the numbers didn’t make sense in the end. So, yeah, I would definitely agree with you Ashley. Make sure everything is covered and then all you have to do is … If you lose money, either way … Oh, I think he didn’t really say it, he didn’t say he was selling money would lose. He just said he wasn’t getting what he wanted. So I think, Dane, all you have to do is compare these two things. If you are losing money on a monthly basis from a cash flow standpoint, that’s better than just taking a little less profit on sales. Because you could sell it and then take those funds and maybe go to another market where the numbers make a bit more sense and then you can get some cash flow from the rental.

Ashley:
Yes. Also a point of view. So, like Tony just said, you sell it, you take the money, and you buy your next property. But if you stick with it and refinance the property, or maybe get a line of credit on the property since this is your primary residence, you can get a very low interest rate on a line of credit right now. Then move out and you use that money to buy your next property. So instead of increasing the mortgage on your next property, you have more money to get a better deal on your next property. Because you are drawing equity from this first property. And then you rent it out. You just need to make sure that the rental income can cover the new mortgage payment.
But I think a lot of people build their portfolio this way and can grow and scale by moving out of this property and renting out the previous one they were in and it kind of sounds like Dane was working on it. If he bought for $ 89,000 in 2017, it’s now worth $ 200,000. This is a great Dane. Congratulations.
So you can just keep that momentum going. So either you do the live-and-flip strategy of selling it and then taking the proceeds, moving to the next property, or renting it out. But what you really need to do is calculate the numbers for each scenario. Take a look at what that looks like and look at it long term as well. What does this money bring you? Is it more beneficial for you to take out a higher loan on the property that is now your rent? And does your tenant have to pay this mortgage? And you who live in your primary residence have a lower mortgage payment because you could come in with more money and you don’t need a mortgage payment that much. And look down the street, how will this end? And when this property has gained so much appreciation in such a short time, there is even more room and growth for appreciation that you want to keep for longer.

Toni:
Yes. This is in choices, isn’t it? And I think there is no right answer, Dane. You need to think about your specific situation and what is important to you. Because Dane’s goals may be different from Tony or Ashley’s, and that will in a way dictate what the best move is. I think the only thing I want to add is that as you go through all of these potential expenses, you are just making sure that you are capturing it all. Maybe they don’t think about servicing repairs, or maybe they don’t think about CapEx or property management. Will you manage this property yourself or will you outsource it? So just to make sure you capture everything. Again BiggerPockets, use one of their calculators, they really walk you through everything you need to include. So if you’re trying to figure out the best way to go, head over to BiggerPockets and check out the calculators.

Ashley:
Yes. And finally, Dane, get yourself a huge whiteboard and write down the different scenarios that could happen. If you sell the house, rent the house and just expand it. What comes of it, run to the numbers and see and compare them side by side. But yeah, I think that’s it for that Tony.

Toni:
Yes. I’m pretty good on my side too.

Ashley:
Yes. OK. Thanks Dane. Thank you for submitting your question. And if you want to hear your question or a specific topic about Rookie Reply, please write a message on Facebook in the Real Estate Rookie group or send us a DM on Instagram. I’m Ashley @wealthhomerentals. And he’s Tony @tonyjrobinson. Thank you for joining us for Rookie Reply. And see you on Wednesday with our next guest.



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