“I’ve got a 3.5% interest rate but want to move, what are my options?”


Author: Tony Mathews, Managing Broker/Owner Keyrenter Northwest Chicago Property Management

More and more people are considering renting out their home instead of selling, and with interest rates rising over the past year, renting has become a more attractive option for many house seekers. Those who were fortunate and able to purchase and lock in a lower rate over the past several years are sitting on an asset that they might not realize—that low interest rate mortgage.  Holding on to their property and lower rate makes sense in a lot of situations, but what if you want or need to move, yet you don’t want to be a landlord?

Hiring a property manager isn’t just for large apartment complexes.  Since the last market crash in 2008, property management companies have been busy managing single-family, townhouse, and small multi-family properties that became bank-owned; or the owners just weren’t able to sell in a down market and wanted a professional to market their property for rent, find good tenants, and thereafter handle any maintenance or tenant issues that could arise. This service takes the stress out of being a landlord so owners can sit back and enjoy a more passive investment.

Let’s take an example and look at the math behind selling vs renting out a property in this market.  

Jim and Kathy own a 3 bed, 2.5 bath single-family home valued at $300,000 and have $75,000 in equity in this property; they owe $225,000 on their 3.5% interest rate mortgage.  Their mortgage payment is $2100 and that includes their taxes and insurance.  This property—with today’s interest rates—would cost over $2600 per month with taxes and insurance, and that’s with a $75,000 down payment (25%).  After realtor commissions, fees, and closing costs, they stand to take home around $45,000 if they were to sell.

Jim and Kathy decide to gather information about renting their property and receive a rental analysis that shows similar properties in their area are renting for $3000-$3200 per month.  Factoring management fees and reserves for maintenance/repairs they stand to profit $8400 the first year.  What gets interesting is when they start looking beyond that first year and see what their asset can gain in value over time as rents generally increase and their mortgage balance decreases.  They decide to move forward with renting the property and realize that the equity will be there in the future.  After all, they could always just sell down the line if needed.  

If being a landlord is intimidating or too time consuming, consider a property manager to take the stress out of investing in real estate.  You may even, to your welcome surprise, establish some passive income this way.

About the author:

Tony Mathews was born and raised in the Northwest Suburbs of Chicago and has been a licensed Realtor since 2007. He has 20+ years of experience in real estate and has specialized in investing in distressed property. He started his real estate journey by working with his family-owned real estate development company for 5 years focusing on residential land and subdivision development. His family has real estate ties in the Chicagoland area going back to the 1950s and he even helped prepare rental property as far back as his teenage years. He loves working with other investors to help them achieve their financial goals. As an investor himself, he knows what it takes to run and maintain a profitable rental property and to attract great tenants.  As owner and Managing Broker of Keyrenter Northwest Chicago he has adopted and implemented best practices of other Keyrenter Property managers and team of professionals that focus on excellent service, communication, transparency, and accountability. By working with Keyrenter, investors have peace of mind that their property is being taken care of and continue to be profitable. This allows them to focus on working on their business, not in their business.