URGENT Keep renting or sell!

[Lucas Laria]

Hi everyone,

I am new to the forum but have been listening to Bigger Pockets podcast for sometime now. I am currently at a crossroads for selling or renting a single family home I own in Virginia. 

The house is 5 years old (I bought it new) with brand new pre finished hard wood flooring I put in along with a fresh paint job. It is located in Northern Virginia and I could either rent the house at $2,800.00 per month and cash flow about $900.00 per month after accounting for monthly costs. This is about 4.5% return on equity I have in the home. The house is in a strong and developing community. 

OR I could sell the house and walk away with about 210k in cash and avoid any tax exposure because I lived there 2 out of the last 5 years. My plan would be to earn 5% interest on the money in a CD or Bond while I look for another investment opportunity. 

It is my only rental home and I would like to own more homes in the future but interest rates rising it also makes it difficult to purchase homes. Am I messing up by selling my one and only rental home that returns a decent cash flow rate and has a decent mortgage rate at 4.3%?

Any pointers or guidance is appreciated 

[Randall Alan]

Quote from @Caleb Brown:

I would try to keep and pull a HELOC. The 210K in equity is quite a bit so if you cant tap into then sell. Just make sure you are seeing what deals are out there before doing that, 5 years ago the market was different from now

 So I'm going to say sell before the 2 of 5 year period is up.  If the entire $210,000 was a capital gain, that is a $31,500 hit you would take when you sell it after 5 years.  That is 35 months of pure profit you would give to Uncle Sam to keep it past your grace period for living in the house.  The $210,000 you net is 233 months (that's 19.4 years) of your $900 profit you get when you walk away, cash fat and you don't have to worry about maintenance, tenants, etc.  You can then use part of your profits to leverage more than one new investment.  If you took $150,000 of your profit and redeployed it you could buy $600,000 worth of new real estate financed at 25% down.... leaving you $60,000 to enjoy / do something else with.

Lots of ways to look at it.  No answer is probably right or wrong.  Just what works best for you.

All the best!

Randy  

@Lucas Laria