Sell Home and Rent?

Something you could consider is to NOT sell your home and still move out and rent. We moved out of our first home that we owned that was about 800 sq ft after we had our second child. We had wanted to sell it, but the way the market was we would've taken a loss, which we simply couldn't afford to do. Thanks to the encouragement of friends who were landlords, we kept it as a rental property with the intent to sell when the sellers market improved. But then we discovered that landlording wasn't hard for us and now that home nets us over $1K/month that goes into our pockets, plus a few hundred dollars more a month that our tenants put into our equity. I'm so grateful we didn't sell it! A couple benefits of turning a home that's been your primary residence into a rental property is that you still benefit from that advantageous mortgage interest rate you got when you bought it to live in (compared to if you'd bought it to be a rental property) and you already know the house inside and out, which makes it a lot easier to be a landlord. And if you're planning on renting, you don't need to sell the house now for your next down payment. And you can always cash out on it later. Just adding another option to consider.

I think it really comes down to how important is your home/living space to you? Do you actually want a house ? A house is larger and is often going to involve more expense and effort. That's ok if your home is a focus of your life. My home isn't that important to me. I'm mostly happy in a rent controlled apartment. I have less space, but I need less space. I know that's not for everyone. I guess what I'm saying is buy/rent isn't just a financial decision.

That formula seems to only look at cash flow–right now, not the big picture. With a mortgage, part of your payment builds equity in an asset that usually appreciates. Rent is 100% gone forever. Mortgage payments stay fixed—rent keeps rising. When I bought my first house, my mortgage was only slightly higher than rent, but within three years rent had passed it. Eventually the mortgage gets paid off. Rent never does. That said, there are instances where rent is better especially for transition.

Your best bet financially is most likely to stay in your house. Bottom line, you have to run the specific numbers for your specific situation and house. When making a buying decision, if you are going to be in a home less than 3 years, renting is usually better. If you are going to be in the home 4-7 years or more (you have to run the actual numbers for your particular market (not some generic 150% formula!) buying is generally better financially. Since you have already bought and invested time, the math is more likely in favor of staying in the house. Inflation is your friend over time as rent increases a lot more than the cost of owning a comparable home (to include repair and maintenance costs), plus the home owner benefits from inflationary increases in home value for the entire value of the home, not just for growth on the down payment. A key part of making the numbers work is to treat your home like a rental house and rent to yourself. No unnecessary upgrades. If your landlord wouldn't put in new countertops for you as a renter of a house, then you shouldn't put them in for yourself either (or don't count that as part of the financial equation!). I have written several articles giving details on how to calculate the rent vs buy breakeven point. Here is the main one that contains links to the other articles. [Your Personal Home IS An Investment – Living The FIgh Life](https://livingthefighlife.com/your-personal-home-is-an-investment/.) Rent vs Buy is an area where the anti-buy content creators have missed the mark with the "renting is always better" binary trope because they don't run the numbers over the long period or compare apples to oranges like JL Collins did in his anti-buy article from a few years ago. Similar to stock investing, real estate is a long-term investment and buying and renting to yourself is just as powerful (or more) financially as renting to other people. All the best in your housing decision and your financial journey!

Hi! Another happy renter here but I have to caveat that with a question: what are your long term goals? There is the math side of things, but if you have that low of a mortgage and you are planning on staying in your area longterm, that seems to be an important factor. I'd also think about the age of your current home- how soon will it need a new roof, hvac, windows, etc? I'm sure Paula will cover all of that in her excellent response below, but I don't think this should just be a math question. Fill us in on what you're thinking if you'd like- I'd be interested to know more!

Happy renter here! I think some of the calculations assume you're considering buying a home vs renting, and it may be a bit different in your case since you already own the home and are considering selling. For us, one consideration is avoiding the "phantom costs", as Ramit Sethi calls them, associated with home ownership. As a renter, we never have to replace any appliances, it's not our problem if there's weather damage to the house, etc. Our rent is a price ceiling, a mortgage would be a price floor. I'd assume that the Quit Like a Millionaire have accounted for this in their formula, since the 150% is way higher than the naive advice I've heard to buy if the mortgage is <= your rent. I haven't gone back and re-listened, but ChooseFI episode 551 has this topic in the title, so you may find something useful there. Paula Pant has also been on and discussed her price-to-rent ratio: [Rent vs Buy: How to Make the Smartest Choice](https://affordanything.com/i-paid-rent-today-i-also-collected-rent/)