Sell it or Rent it?

The first newsletter hot off the press! Let’s GO!!! Thanks for being here. My goal is to bring you value each and every week. No AI slop.

My wife always says, “if you didn’t take the time to write it, then I’m not taking the time to read it.”

With that said, let’s start this journey off by crunching the numbers of a real life scenario. My hope is you can learn from someone else’s situation and apply whatever is relevant to your own situation.

Let me set the scene…

This person owns their home and if they sold today, they would walk away with approximately $273,500.

Let’s take a look at their options:

NOTE: I ran their numbers based on purchasing a new home for $750,000. At the time of this evaluation, interest rates were approximately 6.3%

Option A: Sell your home, roll 100% of the proceeds into your next home.

Purchase Price: $750,000

Down Payment: $273,500 (36.47%)

Interest Rate: 6.3%

Projected Monthly Payment: $4,218

Option B: Sell your home and put 20% down. 

Purchase Price: $750,000

Down Payment: $150,000

Interest Rate: 6.3%

Projected Monthly Payment: $4,983

Remaining Cash from sale = $123,500

Option C: Keep your home, rent it out, and buy your next property with 10% down. 

Purchase Price: $750,000

Down Payment: $75,000

Interest Rate: 6.3%

PMI: $352* can go down substantially with good credit

Projected Monthly Payment: $5,799

Projected Rental Income: +$600

NOTE: This person also had money saved up for their next down payment so I didn’t factor in a HELOC payment

Here’s the snapshot analysis:

Unless your goal is the lowest monthly payment, Option A is the worst option. It ties up all of your cash and reduces your leverage on the property ultimately affecting your cash on cash return. Put simply, your money would be better invested elsewhere.

With that said, let’s compare Option B and Option C.

Between option B and Option C, the difference in monthly payment is $816/month. When factoring in the $600 of cash flow from your new rental property, there’s really only a difference of $216/month. 

The monthly payment for option C becomes $5,199. 

Things to consider:

1. As it stands, is an extra $216/month worth having an investment property that will appreciate in value, have someone else pay down your mortgage, and have some additional tax benefits?

    

   I almost sold my townhouse for $445,000. In just a few years time, it has appreciated to $525,000 and cash flows nearly $500 a month.

2. Plus, if you have good credit, your PMI will be reduced from the estimate above. 

3. Your rate is locked in. The cost will only ever go down when you ultimately refinance the property. 

4. Option B leaves you with $123,500 in cash. Do you have a need for this much liquidity? Do you already have an investment in mind to deploy this amount of cash?

Remember, there are no wrong answers. It all depends on your specific situation and the goals you have for yourself.

If you found this helpful, let me know in the comments or share with a friend. Small actions like this help me connect and reach more people.

Thanks again for being a part of this growing community!

You don’t have to be an “investor” to invest in real estate AND if you want help crunching your own numbers, you can schedule your FREE consultation here.