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My wife and I bought our current house about a year ago. We love it. The location is great with many new projects coming to the area, including a train station, a shopping plaza and a marina by the Potomac River.

I am a dentist. This year I bought a practice in downtown Washington DC. This is considered my small business investment. It's a good 45 minutes to 1 hour commute each way. I am pretty energetic but I wake up very early and I am feeling the burnout. In a few years we might move closer to my office and it will be closer to where my older son will go to college if he goes locally.

I have an FHA ARM on my house that's 3.2%. I paid around 5% down and the current principal is around $540K. I pay around $3400, including interest, PMI, etc. My house value went up to around $600K but it can rent for only $3,000 to $3,200 a month. I am not worried about finding tenants. I am more concerned about a negative cash flow.

I know how to run a dental practice but not real estate. It's likely that I will hire management company until I learn more about this type of investment.

I hope to be working in my practice for the next 20 years. By then, hopefully this house is paid off and I can realize a good passive income.

Do you think that I should rent or sell my current house?

Bob Baerker
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Khalid
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2 Answers2

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I know how to run a dental practice never real estate.

Do you think I should plan on renting or selling my current house?

I think you answered your own question.

Community
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RonJohn
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You mention "in a few years" you "might move"; that's too far in the future and too fuzzy of a timeline to worry about making that decision yet.

In a few years if and when your family does decide to move, you can run the numbers then to make a better informed decision. Between now and then, the value of your house and the rent it could bring will change.

You mention your hope that maybe 20 years from now your house will be paid off and you could use it to generate a passive income. Here is a thought experiment, working with the numbers you provided today: if you had $600k sitting in the bank, would you buy a house with that money to rent it for $3k/month? That would be a 6% return on your money. Does the idea of tying up $600k for a "passive" income of $3k/month seem attractive to you? I put "passive" in quotes because being a landlord, even with somebody else managing the property, is not as passive as buying $600k worth of index funds that require no more effort than opening a statement every month.

This is very simplified, because this does not include the expenses involved with owning: insurance, taxes, maintenance, management fees, etc., and it doesn't factor in any future increase in the value of the house or tax structuring.

Does the idea seem attractive to you? There isn't a right answer, it depends on if you are interested in being a landlord or if you don't want the hassle.

It's also very possible that your $600k could be used to purchase a property (or several with leverage) that would be better suited to renting than your current home. For example, a multi-family property or located in a different neighborhood that could demand a higher rent.

spuck
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