WWYD? Help me with analysis paralysis

[Ashley Shudan]

Hi all:

I’m new at this and looking for some guidance. One of my goals for 2022 is to invest in real estate, after thinking about it and working towards it for several years. My husband and I are from East Tennessee, but we currently live in Northwest Montana. We’re looking at moving back to our hometown in 2022 for family reasons. This gives rise to the question of what we should do with our current house – it could be an opportunity to get started with an investment property by hanging on to our current property once we move out. I’m trying to get my thoughts in order so I can make plans accordingly, and any feedback would be appreciated. I know there’s probably not one “right” answer to this situation, but hearing others’ opinions will help, I think.

The Montana house is in a town that’s a gateway city to Glacier National Park (for summer activities) and located close to a ski resort (winter). It’s a great location in a subdivision about 5 minutes from the region’s airport. The real estate market in this area is, like many places, booming. I’m being conservative with my estimates and numbers below because I’d rather underestimate and be happily surprised than overestimate and be disappointed. We do not need the equity from the Montana house to buy another property in our hometown. Since we live in the house now and have lived here for several years, I have a good idea of the carrying costs.

Other random factors: (1) We absolutely love Montana and eventually we'd like to split our time between MT and TN when family/work allows (which might be a reason to keep the house as part of a long term plan) (2) Other markets we're looking at investing are STR– Great Smoky Mountains (about 30 mins. from our hometown); Myrtle Beach area (I have a connection through my job and regularly visit the area); LTR single/multi-family properties in our hometown.

Option 1: Sell. The house is worth $650k. We owe $330k at 4.25% interest. (Note: I’ve been evaluating a re-fi for a lower rate but want to decide on a plan for the property and whether I want to get cash out before I act on it). If we sell, we could use the money towards other investment properties. 

Option 2: STR. Based on research, it looks like we could net about $40k a year (I'm projecting a lower occupancy rate than AirDNA data to provide some wiggle room) after carrying costs. There would be some costs to prep the house for STR, but it's fully furnished already so shouldn't be massive.

Option 3: LTR. If we did a long-term rental, we’d be looking at an annual net of about $6,000 (or roughly $500 per month).

I'm leaning towards the STR rental option. I am always a worst-case scenario planner. I figure if the STR rental doesn't pan out for some reason, we can always fall back to LTR or sell. It wouldn't be hard to quickly do either with the current housing market. The cash flow is obviously more attractive on the STR option, but I understand that will come with its own hassles and dedication of time. We have reasonable cash reserves and assets as well that would allow us to carry the property without any income for substantial periods of time if needed.

What would you do? Are there other considerations I should be thinking about?

Thanks for much for any insight!