Should we sell our duplex?

[Britton Schow]

We purchased a 1940s up down duplex in 2018 in Pocatello, ID for $124k. At the time the basement unit had been renovated up to the sheet rocking phase and the upstairs unit was vacant. We did a facelift on the upstairs unit, placed a tenant and then proceeded to finish the downstairs unit. We moved into the basement when we completed it. All in all, we spent about 18k total fixing up both units before moving in.

The duplex is located close to a university, both units have high ceilings (9-10ft), and are in great condition inside. Many of the houses in the surrounding area aren’t super well maintained, though the city has a couple of housing projects planned to try to help rehabilitate the area. It is relatively easy to rent to students despite the area being a bit more rundown.  In 2021 we did a cash out refinance, and pulled out enough money to replace the roof and repair a sagging front porch (about 16k). We refinanced at 2.5% on a 15 year mortgage and owe about 127k.

Our current monthly payment is about $1000/month with about $150wsg/month. We have since moved out, and rents are $1600/mo., though they could be closer to $1800/mo. (we have fantastic tenants and don’t want to risk pushing them out). We anticipate more repairs to the exterior and the upstairs unit bathroom in coming years. 

Recently the market has increased dramatically in our area and based on comps we could sell for $270k+. The market is artificially high in our area right now, and we aren’t sure we could ever sell for this much again. Also, we could sell without paying capital gains tax since we lived in the property for 2 of the last 5 year. We never intended this to be a long term hold due to the age and location of the property, but other deals are hard to come by right now. Would we be better off selling now and looking for deals as the market stabilizes, or hold, and hope that future appreciation/mortgage pay down will offset future repairs and capital gains taxes? 

Side note: We’re also doing a live in flip at the moment, and the sale proceeds would help us to complete that more quickly and additionally have enough for about 2 down payments on other properties.

Also, just a note, due to zoning changes in our city, if the duplex were ever to burn down or be destroyed in a natural disaster etc. (Unlikely) it would have to be rebuilt as a single family home in a neighborhood that is predominantly multi family.

Thanks in advance for your advice.