Advice. Moving up. Rent out current free & clear home? (Anaheim: rentals, HOA)

[criss.6]

I currently own my current home in Anaheim Hills, CA free and clear which current market value is appx $575K. I paid 390K 6-years ago.

I am looking to purchase a larger home for my growing family and looking in the same general area with a budget of $850K

I have $300K cash to put down towards the new mortgage. Do I sell or rent out my current home? Of course the wisest decision financially would be to stay put in my current "paid off" home... but it's getting cramped.

[Electrician4you]

Rent it. Just make sure you screen your tenants. I moved and purchased a new house and rented my old one.

You can either DIY or get a PMC if you don't want to/can't DIY

[ysr_racer]

Somebody else paying off your mortgage, what could be better than that?

[Electrician4you]

Originally Posted by ysr_racer

Somebody else paying off your mortgage, what could be better than that?

Making 5% on top of it? His mortgage should run 2k and 6k in taxes a year. (About 2500 Piti) his old house should rent for 28-3200 depending on what it is.

[Pennychaser11]

Rent it out. It's easier than you think. Just remember, no tenant is better than a bad tenant. Considering the location, you should have no problem finding good ones.

[Sunny_View]

Oh wow...you own your own home? So basically, you don't have a mortgage payment every month?

I'd either stay put (if I can), OR.....get a bigger house and rent out to tenants using a PMC. They can screen tenants better, and it's just "safer" imo.

THe money from the rent of your paid off house could be going towards the mortgage in your new house. Or maybe I'm not understanding the situation properly?

[jw2]

I would sell it, take the cap gains free and clear of fed and state taxes. Then if you wish to buy a rental, buy one or two specifically targeted to be a rental. Who says your current home would make a good rental anyway. The house I live in would not make a particularly good rental, I would be better off selling it and buying different houses in a different area. i suspect you would too.

Don't be swayed because you happen to own it. You will start to lose the tax exemption of your gap gains as the years tick by....even if you sold your house and bought a similar house in the same neighborhood, you would get the tax exemption..don't lose this.

[Electrician4you]

Originally Posted by Sunny_View

Oh wow...you own your own home? So basically, you don't have a mortgage payment every month?

I'd either stay put (if I can), OR.....get a bigger house and rent out to tenants using a PMC. They can screen tenants better, and it's just "safer" imo.

THe money from the rent of your paid off house could be going towards the mortgage in your new house. Or maybe I'm not understanding the situation properly?

You understood it correctly. But if he gets a PMC he loses money. If he's cautious and a fast learner he can DIY and save himself those unneeded additional costs. His costs would be around 6500 a year give or take. Why the hell do you want to give that up if you don't have to?

Originally Posted by jw2

I would sell it, take the cap gains free and clear of fed and state taxes. Then if you wish to buy a rental, buy one or two specifically targeted to be a rental. Who says your current home would make a good rental anyway. The house I live in would not make a particularly good rental, I would be better off selling it and buying different houses in a different area. i suspect you would too.

Don't be swayed because you happen to own it. You will start to lose the tax exemption of your gap gains as the years tick by....even if you sold your house and bought a similar house in the same neighborhood, you would get the tax exemption..don't lose this.

Let's say he rents the property for 3,000 a month. I'm just averaging it out as he could probably get a bit more but for the sake of it lets call it 3k. His Income from the property will gross 36,000. At 3300 a month it's 39,600. Every time one of my rentals comes up I get swamped with people. I have both HOA and SFR homes and I have them rented within 30 days and that's because I take my time screening. There is absolutely no reason for OP to not rent it. Add about 3% rent increase per year this house is a cash cow.
Tax exemption? When you buy a new house you can petition for that, we did. And our old house is a rental now and it's cash flowing. Even if he couldn't transfer the tax exemption he now has deductions. Which will help lower his tax base. When you just added 36,000/40,000 dollars to your annual gross income you're not losing out. You're gaining. Also why should op take a 6% haircut right off the top on the sale?

[OCBruin]

Also depends on investment strategy. That money cashing out can get better cashflow, cap rates, returns in other areas. SoCal has such high premiums that the returns aren't stellar...

[Electrician4you]

Originally Posted by OCBruin

Also depends on investment strategy. That money cashing out can get better cashflow, cap rates, returns in other areas. SoCal has such high premiums that the returns aren't stellar...

Ok like what?