To Rent or to Sell???

[Account Closed]

Hello All, I'm new to BP and amazed by the abundance of knowledge and willingness to help others.  This community is truly amazing.

I've been in my first home and primary residence for 5 yrs and currently in a dilemma as to what to do with the property. In spring I'm going to be moving into my girlfriend's house and trying to weigh my options as to sell or rent it when I move. I really want to get into REI and start generating passive income but not sure if I should cash out and look for multi-famliy units, or learn the landloarding process with my existing property (hopefully in a good tenant/family environment).

The house is in a desirable/affluent Milwaukee suburb with almost no rentals available. It’s a 3Br/1.5ba, 3 car garage, 1.5+ acre property that I’ve renovated almost top to bottom. Looking at the few other rentals available I think I can rent it for about $2k/month.  Current expenses (mortgage/prop tax/ garbage/sewer/ insurance)) are under $1300/mo.  I know I'll have to add a bit for insurance and maybe lawn maintenance/snow removal if I don't do it myself or have tenant responsible.

Housing market has significantly gone up and my $200k investment (w/reno) can be sold for $260-270k.  This would give me some tax-free money to go after other properties (probably multi-fam).  My dilemma is that if I rent it out for more than 3 yrs I’ll get hit with capital gains tax wiping out all potential cashflow profits.

I’m looking for strategy ideas because this currently barely meets the 1% rule based on investment, but is more if you look at market value.

Should I rent it for 2.5 years, leverage my $100k equity and borrow against it to get other properties? Or should I take the cash and find options that will yield more cashflow and avoid the risk of $20k+ capital gains tax?

Any input is greatly appreciated!

Chris