Should I sell my Rental SFR in San Diego?

[Nathaniel Donnelly]

Hello all! Been a while since I've been on, but I'm looking to get active once more.

Situation: My significant other bought her house in San Diego in 2006 and survived the 2008 crash by refinancing with an ARM that had an amazing rate. It was the right thing for her to do at the time, and she weathered the storm and now has roughly $200k in equity in the home. However, the ARM's interest rate has now increased to a point where the mortgage has eclipsed the rental income as of January 1st.

Although I promised myself years ago to NEVER SELL A HOME, my initial thought now is to sell immediately, but I'm not exactly sure how much we will have to pay in taxes if we do. We have not used it as our primary in the last two years.

I'd like to turn the profits into an out-of-state property, possibly with Memphis Invest, but we also have a bit of debt to settle as well work that needs to be done to our primary SFR that would take precedence.

Refinancing to a fixed-rate mortgage isn't an option as my latest entrepreneurial experiment failed and we took more than a few 30-day lates on some things over the last year or so. (We have recovered since ;-)

Anyone feel like chiming in with some helpful knowledge?  Thanks in advance!