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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?

marked as duplicate by Grade 'Eh' Bacon, Rupert Morrish, Nathan L united-states Jul 17 at 15:28

This question has been asked before and already has an answer. If those answers do not fully address your question, please ask a new question.

  • You may say that your situation is different from the one posted in the duplicate, but the answer given is not so specific. I think it answers your question quite well, as does RonJon's answer below. – Grade 'Eh' Bacon Jul 16 at 18:06
  • If you still think this question is different and fits on this site, we would also need to know your income level, and especially how much your new house will cost. You have estimated your net loss as $200 / month, before management fees (probably a few hundred a month) and repairs and etc... Can you afford to pay that extra loss every month, with the hope that home prices in 20 years make up for the accumulated loss? – Grade 'Eh' Bacon Jul 16 at 18:08
  • Sell it. Are you willing to trade your hourly rate as a dentist for that of a landlord? It seems silly to even consider. – Pete B. Jul 16 at 18:18
  • my income is kind of hard to predict this year, because I bought an existing office. I am on payroll as an employee of my S Corp. So not sure how the numbers would be at the end of the year. But generally speaking Dentists make around $120K as associates, so once you become the owner it's expected that you will make more. It's kind of too early to tell. I do however have some savings, which I am keeping only for emergencies. – Khalid Jul 16 at 18:19
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    I enjoy being a landlord, but starting off with negative cash flow and planning to use a property management company is not a situation that likely makes much sense. The good news is you can try renting it for a year or two if you want and then sell it without worrying about capital gains. – Hart CO Jul 16 at 19:40
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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.

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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.

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