Take the equity or hold long distance rental?

[Ben Le Fort]

Hi All,

I have been pondering a question lately and thought I would get everyone's thoughts on the subject.

My wife and I live in Ontario, Canada and we rent a house in Nova Scotia to my parents. My parents are considering moving out here in 3 years when my mom hits retirement age.  At which point we will be faced with a decision: Sell the house in Nova Scotia, or Rent it out?

We bought this house this January and really got an awesome deal. We paid $220K put 5% down and will put in another $5-$10K in improvements over the next few years. 1/2 a year later and our neighbor's houses are selling between $260k-$280k. 

When my parents move here in 3 years we will put 5% down on a house here in Ontario  and do the same thing. Prices are a lot higher here but we would not need any of the equity to get the 3rd house locally. I am not super stoked about the idea of owning an out of province rental (to a non family member) but am not ruling it out. 

My question: What should we do in 3 years, take the equity and reinvest elsewhere or keep renting and building equity with decent cashflow?

Thanks,

Ben