I mentioned before that my wife and I are considering moving this spring/summer. If we were to purchase another home, we now have the dilemma of either selling or renting out our current home. Lets weigh in the options:
Sell our Home:
- This option would give us the equity in our home immediately which is approximately $50,000. This would equate to a larger down payment on the next home and a larger HELOC balance to start the Smith Manoeuvre.
- Don’t need to worry about tenants/repairs/landlord issues
- Missing out on a cash flow and future appreciation opportunity.
Rent Out our Home:
- Market rent: $995/month
- Current Mortgage: $700/month
- Cashflow: $295/month
- Future appreciation
- Landlord issues.
- Equity trapped in home. I can get some of the equity out with a HELOC, and use this to invest/repairs. This way, it will keep the total debt on the rental property deductible.
It seems after weighing out the options, renting out my current home would be the financially aggressive way to go. I don’t need the equity in the home to meet the 20% down payment requirement on my next home, I can use my savings/portfolio for that.
The only issue being that I wanted to start the Smith Manoeuvre which would will be challenging with a small initial HELOC balance on my new home. Perhaps I can tap into the equity in my existing home with a HELOC, and use that to invest. Hmm.. time to do some more thinking.