Rent or sell current home in Austin TX?

[Brian M.]

We have a 3BR townhome in the heart of Austin TX. We bought it for $600k two years ago and it's worth ~$850k now. There's a $325 HOA with it which includes yard maintenance and joint pool. We are looking to move to a SFH and don't need the $ from the townhome to do so.

When we move out, we can rent the place and profit $100-$200/month. We could do that for another couple of years then sell so we're still under the "live in the past 2 of 5 years" rule for capital gains tax. Alternatively, we could sell now and repurpose the profit immediately. If we repurpose, we would either put the cash in equities or semi-passive real estate like a syndication or a turnkey rental (we don't have a lot of time for BRRRR or STR).

Our goal is long-term wealth without putting in a lot of sweat equity. Cash flow would be nice but not necessary. Thoughts on renting vs selling?

[David Ivy]

@Brian M.

With the information you gave, I would lean toward renting out while being mindful of the "2 of 5 years" rule, as you mentioned. All signs point to you building even more equity in the property over the next couple of years. However, there are no guarantees. So, it depends on how this property would fit into your overall financial picture. For example, if the equity in this one property represents a significant percentage of your net worth, then cashing out for more diversification could be prudent, especially if you're nearing retirement.

For your cash flow calculation, be sure you've included items like vacancy, maintenance, capital expenses, and property management (if needed). If you're just using gross rent minus PITI & HOA, then you're not getting the full picture.