I was talking to a buddy of mine, and we are both pretty interested in finance, 401k, investments, etc.
We were discussing our houses that we both own (kinda). We were trying to determine how it would be more beneficial to sell our homes instead of renting it. I own a home that I paid $180k for, with a 3.5 percent interest rate. I owe maybe 140k on it still. I just recently paid off all of my debt (student loans, truck, cards, etc.) and was dumping into a 401k at match and a roth IRA to max.
I was considering dumping the remainder into my home loan instead of maxing my 401k. I really want to get it paid off so I can start saving for a down payment on another house. I want to save around 100k, buy a 500k house, and rent this house out. I would charge under what is considered average for my area. My roof, patio, deck, water heater, and carpet are all new and paid off. I'll likely have to drop 10k on new HVAC soon, so it will all basically be new.
Anyways, there was some discussion that it would be better to sell the house for its worth (valued at $350k), and invest any profit. I don't see how this is possible if I sell my house for 350k, maybe net 100k profit, and invest at an average of say 7% when I could be making way more in rent.
What makes selling a house and investing (instead of renting your paid off house) a better choice?