Buy or Sell?

About 3 years ago we bought our first townhouse, now we are buying a new home and plan to be moving into it with 2-3 months.

The townhouse from 3 years ago is now 8 years old in a fairly good neighborhood. We had picked it up for $110,000 and the real estate agent told us that we could sell it on the market today for $220,000.

We don’t know if we should sell the townhouse or rent it out. Our agent tells us that the townhouse is getting to old(It’s in very nice condition) and we should sell it, but we are afraid that they are just trying to make quick money by getting us to sell it.

On the street that the townhouse is on they are building 50 new townhouses that are going for $260,000 at this time.

At first we thought renting it would be a good idea, then selling it would be better. But after looking at buying another new townhouse (240,000) and renting it out (about 1,200mth) we thought that we would lose money due to the buying and selling fees on the new investment and old townhouse.

Would it be better for investment wise to sell the townhouse now and take about 100,000 to invest in other properties or rent it and sell it in a year or so?

I guess the bottom line is should we rent for a while or sell it and start flipping or bird-dogging houses?

Of Course your agent is going to tell you to sell he would make over 6k to sell it!! If it has come up that much in the past 3 years I would hold and rent it for a couple years see if it is still going up! then decide! Depending on the rental market where you are…

Its all up to you on what is your priority. Basing to the figures you mentioned on the market pricing of new townhouses in your area, you should be just fine either selling or renting it.

If you decided to sell it, you’re looking at $100,000 cash in your pocket. You should be able to pocket in the whole amount if you have lived in it for 2 years in the last 5 years. Tax free money is good, especially for $100,000 dont you think?

Now if you decide to rent it, it ok too. But how comfortable are you getting into the rental business? How much positive cash flow you’re expecting to get ? Are you going to manage this yourself or hire a property manager? Hiring property manager saves you a lot of headaches in dealing with dead beat renters (even though its still not a guarantee that they will screen the right people). The bottom line though is it’s going to cost hiring property manager.

But here’s where you have to consider closely if you’re going to buy another property to live in. Right now you’re sitting on a property that could give you $100,000 tax-free. You could only stay ahead if you could find cheaper property than what’s in the markert right now. Home owner in distressed or foreclosed property is where you could normally find these homes. MLS listed properties would be a slim chance especially if majority of the homes in your area are all appreciating.

Your other options to fully benefit from this $100,000 proceed is to move into a cheaper community.