Fascinating financial situation. Before I give advice, I'd like to caveat it by saying that I'm (of course) not a financial professional, and that all financial advice, from anyone, should be taken with a grain of salt. I'm always really happy to tell you what I'd do in the same situation -- but that doesn't guarantee that things will work out. ;)

Remember when selling your house that, in addition to the market price, you'll typically be paying sales tax for any house sale. Typically selling a home involves fixing some parts of it (after inspections turn up issues), etc. All I'm really saying here is that you should expect the total out-of-pocket cost to be higher than $30k.

Rental will likely cost you more than you think. A 10% commission on $1600/mo is $160/month, which means you'll get rental income of $1440 a month. Compared with your mortgage, that's -$460 out of pocket every month. But remember there are real-estate taxes you'll be paying (which, as an example, appears to be 1.1% of the property value per year in a place like your county, which works out to $2200 a year, or $183/mo). Then there's landlord's insurance, which might be $1000 a year, or perhaps less. So you might be looking more at around $700 out of pocket every month. And that ignores any repairs you might have to do (remember: those are real costs. A furnace repair, easily $1-3k, works out to nearly $200/mo spread across a year!

Assuming $700 out of pocket a month, you'd be paying $8400 a year to keep the house as a rental. If you assume your house stays exactly the same price over the next few years, you'd essentially be doing "the wrong thing" if you rented out the house for over 4 years (when your out-of-pocket will exceed the $30k of selling it now).

And here's the question: how much might a house go up in value? This totally depends on where the house is. In general, the US housing market has gone up, on average, by 4% a year over the past few decades. (Remember : this is only an average. Places like Detroit have gone through the floor. Places like SF have gone through the roof. Your results may vary.) But assuming 4% growth, you'd be "making" $8k on appreciation of the house per year. Basically just about break-even with your fee of renting it out. And remember, if you need to pay commission yourself when selling later, you'd need 4 years' worth of appreciation just to pay the $35k of commission.

And here's the other complicating thing: Sally owns another house in [state] as well. That's putting a LOT of your real-estate investment in one place. In my opinion, that's way too much counting on one area of the country growing in value, especially when you don't own those houses out of "extra" money that you don't mind losing.

Here's one way to think about your current situation: pretend you only have Sally's house, and the house you'll buy in [state]. Pretend you don't own the $200k house in [state]. Now I come up to you, and I propose one of two options that you can choose from:

1. Pay me $30k right now, and I'll leave you alone. End of discussion.

2. Borrow $200k from me right now, which you're forced to invest in a stock that, on average, has made 4% per year for the past few decades, but has also fluctuated a lot up or down in any given year. When you borrow this money from me, I will charge you 4% per year. Some years, I'll charge you 5-6% -- but never less than 4%. When you finally sell this stock, I will charge you $30k commission.

Your current decision is essentially the same as this. The 5-6% borrowing rate, in certain years, simulates some repairs you'd need to do on your house. You can basically make this current decision as if you don't own the house we're currently talking about.

Does that make your choice any clearer? For some people it, it will. For others, it doesn't make a difference.

To me, it's down to a few things:

- Cash flow. Do you need the $30k now, and would rather pay the $30k later?

- Risk tolerance. Can you stomach the possibility that your house could further lose value? Would that matter to you? This risk is taken on the hopes that the house actually appreciates in value. And there's a (small, but real) chance it might appreciate a ton.

If it were me, I'd sell right away. Here are my reasons.

- People often expect houses to only go up. But they can go down too. If your house loses another $20k, and then, for whatever financial reason, you're forced to sell, it'd be even more painful.

- The rental earnings (well, actually, the rental loss) is just about break-even with the expected average housing price rise over the next, say, decade. That's a long time to hold a $200k investment only to break even.

- You already have another house in [state]. This is probably a key point for me.

Here's the deal: you have to ask yourself why you wouldn't sell right away right now. If it's because you think you might make good money on the investment, remember that you already have another house in [state] -- if housing prices really go up dramatically, you'll at least make whatever that house makes without doubling down on yet another [state] house.

But remember: if you sell this house now, and prices go up 20% in the next two years (highly unlikely - but I'm just saying), you have to be very comfortable with the fact that you sold it in order to reduce your personal risk and exposure. People forget that the housing market has had years where people lost 20%+ as well -- and in your case, that could be an additional $40k loss.

Let me know what you think. I'd personally sell.