Should I Sell My Home or Keep it and Rent it Out?

[Brent Wilson]

Hey everyone!  I'm new to Bigger Pockets so I'm just trying to get a few opinions on what you would do if you were in my shoes.  

Background: My wife and I are current homeowners. We purchased our current property in Oct 2015 for $144K. After a 10% down payment, the initial loan amount was $129,600. Current loan is a 5/1 ARM at 3.75% (though that will probably increase in a couple years at first adjustment) and a mortgage payment of $740 (600 P&I, 140 taxes and insurance). It's now worth approximately $177K according to a local realtor who we were talking to about possibly selling our home. Our current loan balance is $121,500. I've looked at comps on the market and zillow, etc. Roughly I think we could rent our place for $1,200/mo. Or we could sell right now and pocket around $40K after fees/commissions.

Additional Info: We are moving to a family property where we'll have no mortgage and a comparable housing payment.  So we're not worried about qualifying for anything else.  I've played with the rental calculator some, but I'm a little shaky with some of the assumptions.  I factored in capital expenditures, monthly maintenance, vacancy, and a couple minor expenses for water/sewer/trash, but renter would pay everything else.  I didn't include the cost of property management as with only having one unit I think I'll try to handle it myself.

Obviously for monthly rent I'm under 1% of purchase price at 0.83% (1200/144,000) which is a rule of thumb I see floated around sometimes. Any insight you might have or advice you could give would be appreciated. Just trying to figure out if we should pocket the 40K and save it for the future or stick with this place and use as a sort of test run for rental property investing. I like the idea of having a hedge against the stock market, particularly in retirement (25 years away) when another guaranteed source of income will come in handy. I feel a little hesitant sticking with this place as a rental but I worry much more about trying to purchase a "below market value" SFH or multifamily in the Raleigh, NC area. I just feel like inevitably I would get ripped off or pick the wrong property if I tried to take my 40K and start from scratch on a new rental property. The only other alternative I've thought about is out of state turnkey but as a potential first-time rental investor I'm not sure that would be such a good idea. Please let me know if you have any questions or need any additional information. Thank you in advance for your help!

-Brent