Hello, I was just preapproved for a loan to buy a new home, and my mortgage broker suggested I think about renting out my current townhome. Does this require a different type of loan? What happens when I do not have tenants? Do you suggest working with a property manager? I owe 82K on my townhome and I was going to list it for 95K. Any advice you can offer is greatly appreciated.

If you sell, you are going to pocket about $10,000 {after the realtor fee}. If I were in your situation, I would do some calculations based on the possible rent that you might receive from a tenant to see if it will pay for your mortgage and other property related expenses. I would probably choose renting if I was breaking even on these calculations.

My reasoning behind the rent would be that if I took that money out and invested it in something relatively safe at most I would get around $500 a year. If on the other hand, I assume that the property would appreciate at 4% a year { a little high, but much lower than real estate has appreciated the last few years} then I would be making $95,000 X 4% = $3,800 a year on appreciation.

The choice depends on being able to get adequate rents and screening your tenants so that they are good ones.

The question of working with a property manager depends on whether or not you can afford it as it might take you below break even.

Good luck