onlyTrustedInfo.comonlyTrustedInfo.comonlyTrustedInfo.com
Notification
Font ResizerAa
  • News
  • Finance
  • Sports
  • Life
  • Entertainment
  • Tech
Reading: With a potential 8-10% total return, should we keep our current home as a rental or sell and reinvest the equity?
Share
onlyTrustedInfo.comonlyTrustedInfo.com
Font ResizerAa
  • News
  • Finance
  • Sports
  • Life
  • Entertainment
  • Tech
Search
  • News
  • Finance
  • Sports
  • Life
  • Entertainment
  • Tech
  • Advertise
  • Advertise
© 2025 OnlyTrustedInfo.com . All Rights Reserved.
Finance

With a potential 8-10% total return, should we keep our current home as a rental or sell and reinvest the equity?

Last updated: May 14, 2025 8:00 pm
Oliver James
Share
6 Min Read
With a potential 8-10% total return, should we keep our current home as a rental or sell and reinvest the equity?
SHARE

It’s a tough choice faced by many homeowners with the desire to relocate: should one sell the old home at market prices or keep it as a rental property? Indeed, crunching the numbers to determine the better financial move is often worthwhile.

Contents
Key PointsLifestyle and risk tolerance may be more important factorsThe case for selling the home and investing the proceeds in stocksThe bottom line

However, the right move ultimately depends on one’s lifestyle, personal preferences, tolerance for risk, and, perhaps most importantly, liquidity. Some folks value appreciation of capital above all else, while others may value a simple, flexible lifestyle and plenty of dry powder to be ready for those rainy days.

In this piece, we’ll explore the case of a Reddit user who’s sitting on a home valued at a whopping $3 million. They’ve got a $1.2 mortgage remaining with a fixed 2.5% rate (that’s a ridiculously low rate for mortgage debt!).

With around $12,000-15,000 in expected monthly rent (a 4-5% yield), there’s a significant amount of income that can fund just about any retirement. With such a cheap mortgage, appreciation potential, and robust passive income, sticking with the home rather than selling it could make a lot of sense for those who can comfortably manage a second mortgage.

Key Points

  • This Reddit user is weighing whether to sell their home or keep it and rent it out.

  • The right move depends on a wide range of factors, most important of which, I believe, is lifestyle and flexibility.

  • Are you ahead, or behind on retirement? SmartAsset’s free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don’t waste another minute; get started by clicking here here.(Sponsor)

Lifestyle and risk tolerance may be more important factors

At the end of the day, not everyone is cut out to be a landlord, given the responsibilities that some soon-to-be retirees may drastically underestimate.

Of course, hiring pros to manage a property can make sense, but doing so will eat into your returns. And the full costs should be crunched before the final move is made. In any case, I’m a firm believer that it’s never a good idea to assume a property will appreciate at a rate that’s consistent with past years’ returns. Just like with stocks, past performance is not a guarantee of gains to be had in the future.

Like the stock market, the real estate market can experience corrections every so often. And, if things get really bad, crises and crashes can happen. As such, I think it makes little sense to overleverage oneself with optimistic assumptions in mind, even if the optimistic scenario is the likeliest scenario for some timeframe.

In any case, I wouldn’t be against keeping the home as a rental property, given the cheap mortgage rate and the respectable yield the Reddit user will get. However, it’s unclear where the Reddit user will move and on what terms their new mortgage will be. As such, I’d say it’s best to visit a financial advisor before making what could be the biggest financial decision of the Reddit user’s life.

The case for selling the home and investing the proceeds in stocks

When it comes to 8-10% potential annual returns, the Vanguard Total Stock Market Index ETF (NYSEARCA:VTI), which the Reddit user is considering, is a great long-term holding to consider. Of course, you won’t get the same yield from the VTI. But you also won’t have to worry about a midnight pipe leak that must be fixed. In any case, it ultimately comes down to personal preference.

Arguably, future returns for stocks could prove more muted, given today’s hefty valuations. Some big banks forecast the S&P 500, which is the top gauge of the U.S. market, could return just 4-6% in the next decade. And, of course, market volatility will have to be dealt with to score such a modest return.

In any case, I’d encourage our Reddit user to “reset” their return expectations and not to assume anything. Instead, discussing their asset allocation, passive income needs, and risk tolerance with a financial advisor would make the most sense.

The bottom line

Personally, I think selling the property while diversifying into a broad basket of ETFs makes the most sense. A perfect mix of U.S. equity ETFs, international ETFs, bond funds, gold, CDs (Certificates of Deposit), REITs (Real Estate Investment Trusts), and other assets should be explored as one aims to construct a diversified portfolio of securities.

The post With a potential 8-10% total return, should we keep our current home as a rental or sell and reinvest the equity? appeared first on 24/7 Wall St..

You Might Also Like

China plans regulation to aid tech firms listing overseas, official says

Jack Daniel’s maker Brown-Forman sees sales fall as Trump trade conflicts weigh on spirits producers

Could open interest, buy signals, Coinbase Derivatives-backed XRP futures drive price to $3?

I’m a Career Expert: 2 Workshops That Will Help You After a Layoff — and 2 That Won’t

8 Hidden Towns Where the Super Rich Live in Secret

Share This Article
Facebook X Copy Link Print
Share
Previous Article Tomatoes Recalled For Potentially Deadly Salmonella Contamination In 11 States Tomatoes Recalled For Potentially Deadly Salmonella Contamination In 11 States
Next Article Bride Wants Groom’s Sister to Be a Bridesmaid — but Only If She Hides Her Tattoos and Doesn’t Wear Her Glasses Bride Wants Groom’s Sister to Be a Bridesmaid — but Only If She Hides Her Tattoos and Doesn’t Wear Her Glasses

Latest News

19 Photos of Venice Beach Throughout the Years
19 Photos of Venice Beach Throughout the Years
Finance June 9, 2025
Here’s How Much It Costs To Maintain a Tesla vs Other Electric Vehicles
Here’s How Much It Costs To Maintain a Tesla vs Other Electric Vehicles
Finance June 9, 2025
Why Are My Credit Scores Different? Here’s What You Need To Know
Why Are My Credit Scores Different? Here’s What You Need To Know
Finance June 9, 2025
Why Gilead Scinces Stock Tumbled on Tuesday
Why Gilead Scinces Stock Tumbled on Tuesday
Finance June 9, 2025
//
  • About Us
  • Contact US
  • Privacy Policy
onlyTrustedInfo.comonlyTrustedInfo.com
© 2025 OnlyTrustedInfo.com . All Rights Reserved.