Sell home or rent it?
I don’t know if this is the right place to ask this or not.
Husband and I have a home that we’ve had on thr market for 6 months. We’ve received 3 offers. First was too low, second the buyers needed to sell first and couldn’t (we gave them 30 days to find a buyer but they never did), and third which is what we’re dealing with now. We’ve been in escrow for over 60 days, waiting on buyer to get financials sorted out, and we keep being told “probably by the end of this week.” We’re getting frustrated as we’ve already basically moved out of our home but are still paying a house payment and staying here to do basic upkeep.
We’ve have purchased property and are starting to build a new home (we purchased it outright but need a construction loan for the house). The plan was obviously sell this one first, then build.
For a bit of context- we have a $79,000 balance with 3.75% rate on current home, with the mortgage payment being $1000 monthly. Due to always paying more, we have just over 7 years left on this mortgage if we continue to pay the minimum, 6 years if we pay a little extra monthly. New
Home is estimated to cost about $425,000 to build.
BUT we are now trying to decide what the best way to move forward is. If we wait for the buyers situation to get sorted out, which we have no way of knowing how long it will take, we are essentially losing money because we’re paying a house payment for an empty house. We’ll get principal back but not interest. So here are our options:
1- continue to wait and hope the deal closes soon and sell house. Our profit would be about $440,000 which we would then apply about $200,000 to the new build and mortgage the rest
2- keep the current house, rent it for $2500/month (which is an about average amount for our area, there are definitely some that are higher) and put all of that toward the mortgage, which would mean paying it off an owning outright in less than 3 years. We would then have to mortgage the new house 100% which we’ve been told is doable because we use the value of the land ($240,000) as instant equity which requires no cash down payment. Then after first house is paid off within 3 years, we use that rental income to pay new mortgage.
3- keep the current house, rent it for $2500/month, continue paying the $1000 mortgage and using the extra $1500 to supplement our new mortgage payment for new house
What are we missing here? We’ve never been landlords before but also feel like we’re in a potentially lucrative situation to be able to keep the home we have and use it as passive income. But we don’t want to be naive about the risks involved with maintaining a rental house.