Now let me start to discuss the single most important decision I have to make during the summer: in anticipating of an upcoming relocation later this year, should I sell my house, or rent it out? It is not a million dollar question, but it does have potential to be a $100,000 one, or big enough to make a difference in my financial life.
For discussion purposes, let me compile the facts first:
• The house was acquired in August 2003 for $315,000.
• My mortgage, which was refinanced in April 2004, is a 5/1 ARM at a remarkably low rate of 3.50%. The outstanding loan balance is $243,400 by the end of this month. Monthly mortgage payment is a bit north of $1,100, including ~$400 for principal repayment and ~$700 for interest.
• I pay property tax on my own, and it amounts to $280/month. Homeowner's insurance adds another $40/month.
• The current value of the house is about $390,000 -- my neighbor's house, which is identical to mine but with 1,000 sqft more lot size, was sold for $400,000 a few weeks ago. (If you run the math, you might notice in my accounting book, my home equity was understated for about $67,000. The actual equity is close to $147,000 by now thanks to the housing boom.)
• If I choose to sell, I will only do so after August. This is to make sure I can take advantage of the tax-free clause for capital gains. Plus, my relocation package will cover virtually all of the closing cost, which can normally take up to $30,000.
• My overseas assignment will take about two years, and we don't think we will choose to stay in the current house once we return. Both my wife and I agree we should be able to afford more spaces then. (We estimate our net worth will be north of $450,000 by then and income will increase too.)
• We estimate the house can be rented out at $1,600-$1,800/month. Since I cannot be a local landlord, I will incur monthly maintenance/property management cost of $200-$300 if I choose to put it into the rental market.
There are too many personal finance "experts" splicing and dicng the popular "buy or rent" decision (including a very early one at PFBlog), but when it comes to "sell or rent out," resource is scarce. I am determined to explore this better in the next few weeks at this critical turning point of my personal finance journey. Please feel free to throw in your comments, and they will be very much appreciated.