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Hey all, I have another rent or sell related question. If this is not the most appropriate board for this question, please let me know.

In a year we will be moving out of our 2BR/2BA condo and are considering renting it out instead of selling. Here are the details.

Estimated sales price: $90,000
Current mortgage balance: $57,000
Interest rate: 4% (adjusts in 2008 to 6% max, to a max of 10% in 2010)
Principal plus interest payements: $300
Condo dues: $200
Estimated rent: anywhere from $1000 to $1400 (a wide range I know...I would be SHOCKED if I couldn't rent it for $1000 EASY to the many professional students like myself in the area).

If I assume a 20% non-occupancy rate, $1000/mo rent and appropriate taxes and maintenance expenses and a fudge factor for the occational special assessment, then we are cash flow even initally, but have an after tax 10 year IRR of about 9.7%.

If instead I take out all of the equity, we are cash flow negative by about $2000 due to increased interest costs, but have an IRR of 17% after 10 years. Of course if my occupancy is (hopefully!) greater than 80% then my numbers are a lot better. But I'm trying to be conservative.

I've never been involved in rental real estate, and don't know if my wife and I want to be landlords (non-local at that). But in evaluating the decision, is it:

1) better to TAKE OUT the equity via a refinance or home equity loan, put it in safe investments (money market and/or short term bonds) and use it to pay the negative cash flow if needed? Rather than keep the equity in the home? We do not yet know if we will be renting or buying a new place when we move.

2) better to take out the equity BEFORE it is converted to a rental propery

3) better to we take out ALL the equity (even if it means a higher interest rate)

4) better to refinance for as long a term as possible (i.e. 30 years) to lower monthly payments as opposed to keeping the current loan terms with 25 years left and paying principle faster?

We have a while to make this decision, but I'm trying to get as much information as early as possible. I'm leaning towards renting instead of selling, but my wife doesn't want the risk/hassle unless it's a clear money maker. Any advice?

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