Sell or not to sell?

My husband and I are thinking of relocating to Cypress, TX. We have a mortgaged house in the southwestern part of Puerto Rico. This house was bought for 139K and is now appraised at aprox. 185K (living in it for two years). This represents 46k on equity but we have to pay 5% commision to the realtor and 10% in taxes (We don't have the advantages of tax free capital gain for living in the property for more than two years) and even though the realtor's commision is deductible from the income tax, it will still represent an expense of 13k. We currently pay $876 for the mortgage and we were thinking that renting will be an option since I want a long term real estate investment. The problem is that I am not sure if it will be rented for more than that because of PR is in recession and I am afraid it won't rent enough for us to make any cash flow.. One house in my neighborhood rented for $850 after a few months. Should I sell it or rent it?

renting is dangerous--especially when you won't be there to check on the condition of the house, deal with overdue rent,etc. If you go this route, I would definately use a real estate agent to handle it --one that will make sure that your property isn't abused or neglected. i don't know what the normal rental amounts are in P.R., but you have to keep in mind that you will still have to pay insurances, taxes, and maintenance on the property, so you will have to rent it for quite a bit more than your mortgage payment in order to keep it from drowning you with debt.

Unfortunately, it is a buyer's market right now in real estate and it may take awhile to sell your property if you expect to get the full anticipated equity out of it.

IT is normally a bad idea to try to rent from a distance. When you have an ocean between you it is even worse. If you rent, consider hiring a property management company or someone to be onsite for you.

When you say Cypress, TX, are you talking about Cypress (the subburb of Houston)? If so, we would be neighbors!

sell

Being a long distance landlord is very challenging. I have a client selling her rental in my area because it is so tough to deal with the house from 3 hours away. You will probably need a property management company to take care of this for you and that will cost you 10 - 20% of the rent for the property management fees. Plus you'll need reserves for repairs and maintenance (tenants are hard on rentals). At this point, I don't think it would pencil to keep the house.

sale.

In my opinion, renting isn't a realistic option in your situation. 1) you will be distant 2) the rent may not cover the mortgage, management fee and potential expenses. While fees and expenses are deductible, they are only effectively 33 cents on the dollar. 3) in the event there is a problem, distance and travel expenses. I would sell, invest in your new location where you be there to occupy it or at least be close enough to manage it.

You may want to consider a 1031 exchange with a property in your new location. Talk to an agent with 1031 experience.

It looks like eveyone answered your question pretty well I would just like to add that you should get a Comparative Market analysis done by a good realtor. The number that an appraiser gives you is just a number. What really determines the worth of the home is how much qualified buyers are willing to pay for the home. I have had clients that took out home equity loans because appraisers have appraised there homes at 30% more than the actual market value. Then when they want to sell they get a rude awakening that they already took all the equity out of the home and can only wish to break even.