Submitted by ComfortableLeg8747 t3_11eha1s in personalfinance

Throwaway account for financial numbers...

The Situation

  • My wife is pregnant and we're looking to move to a bigger home where we could raise our kid. Our current home is in a bit of an "up and coming" neighborhood. I want to consider renting our house out, but I'm not sure if it would be right for us.
  • Current neighborhood is not the greatest. A few changes recently have led to an increase in crime - including a few shootings. Part of me just wants to get out while I can. Part of me is afraid it won't sell because of that and part of me thinks it might rent easier.

The numbers

  • Total household income: $180k + ~$30k in bonuses and stocks (IDK if those count towards income for this)
  • Current mortgage:
    • $340,000 @ 3.25% (refinanced summer '21 to pay for plumbing repair)
      • $330k remaining on principal
    • $2,112.30 payment
  • Limited other debts: ~$500/mo in credit card/student loan debt.

If I punch "the numbers" into a mortgage calculator (NerdWallet), it tells me that even paying my current mortgage and other debts that I can "afford"(at 36% DTI) a second house at ~$450k. So that's assuming no renters.

Questions

  • Essentially... would I be crazy to give up my current mortgage at that rate?
    • I've had some people tell me that even just keeping it and banking the money at 3.25% is worth it.
  • Or... Would I be crazy to try to rent it out given the neighborhood?

​

I feel like I just need someone to tell me to just sell the F-ing house, but I worry I will spend the rest of my life thinking I should have kept it to rent it out as most everyone I know that seems financially comfortable has investment properties.

Would appreciate any thoughts or advice. Thanks!

0

Comments

You must log in or register to comment.

kbc87 t1_jadzlt3 wrote

Question 1 which is not even financial : Do you want to take on the responsibilities of being a landlord while also having a newborn?

7

alexm2816 t1_jadznwe wrote

What is the house worth?

What is market rent on the home?

Have you considered your own skill and ability to manage a rental property as a new father? I have a 1 year old and a busy work/personal life and balancing one home is rough let alone a 2nd and tenants.

3

ComfortableLeg8747 OP t1_jae0sy8 wrote

Recently appraised at $425k. Could comfortably see selling quickly for $400k (but who knows)

FMR is ~$2400 for the zipcode.

​

Third question is a thinker...I think I'm willing to put in the work if it's what is best for my family. However I understand that I don't fully understand yet what the implications of having a new born will be.

1

alexm2816 t1_jae2qzr wrote

I've heard of worse. I'd talk to a manager about their costs to understand what you're up against.

Frankly cashflowing $1000-1250 a month with optimistic occupancy rates assuming you do all the work on that kind of market exposure is still a little heavy for me heading into your life phase but I would understand why someone would do it.

1

blahol8900 t1_jae2w8f wrote

Which state are you in? Landlord/tenant laws would significantly affect my answer to this questions.

Market rent is $2400 minus payment of $2100 puts you at $3600 per year before maintenance expenses + tenant turnover expenses. I could easily see this evaporating to $0 with those in mind.

You’re also confident that you have $70k of cash equity in house which, conservatively invested will net you $2,100 of income within headaches.

Also the fact that you can utilize the primary residence tax deduction (once every two years) and basically walk away with a tax free gain of over $70k (depending on improvements made, etc).

Appreciation is what you’re giving up hard to predict / peg.

On the flip side: you could rent it for a few years and then 1031 exchange it into a better neighborhood if that’s your main concern.

1

KReddit934 t1_jae2jbi wrote

"> sell the F-ing house."

You will not spend your life regretting not having a rental to deal with while managing a move, a newborn baby, and all the adjustments coming up.

If you need more, check out JL Collins, A Simple Path to Wealth.

3

GeorgeRetire t1_jae2kxc wrote

>I feel like I just need someone to tell me to just sell the F-ing house

Just sell the F-ing house.

Have you ever been a landlord? Do you really want a second job being a landlord now? Do you know what a house in an increasing crime neighborhood with shootings will rent for? Do you know the occupancy rate for that neighborhood?

3

WizardDresden2192 t1_jae6khj wrote

Sell the house and move on. Things get busy and expensive with a newborn even if everything goes super smoothly. You don't want the headache of finding a property manager /being a landlord with a newborn and an increased mortgage. Take the equity you have now and move on.

2

Left-Landscape-3890 t1_jae1ztp wrote

Moving with a pregnant wife sounds rough. This is the worst time to buy a house darn near. You are thinking of signing up for about 5-6k in mortgage payments a month. Yikes

1