Sell my investment property or keep as a rental?

[Hans Olo]

Greetings all!

Hoping to get some insight from you real estate gurus! My long time tenant is moving out because they bought a home, so I am faced with the decision whether to keep the property and continue as a rental, or to sell it. Here's the facts -- condo unit, 2 bed, 1.5 bath, fully finished basement, end unit with side deck, very close to community pool, playground, basketball court, etc. The unit is in an average quality condo development in an average location in terms of desireability. But alot of rental demand in the area (barely any availability on the market right now). Market value is currently about $230k. Mortgage balance is under $100k with a rate of under 4%. Under years remaining on mortgage.

I'm currently getting only $1600 per month in rent which is far under market rent right now because the tenant has been there for a long time. Current market rents would be $2200. So after mortgage payment, taxes, insurance and condo association fee, I would net about $700 per month at current market rental rates. Renovations needed amount to about $10k-$15k, which will have to be done whether renting or selling. With tenant being there so long, alot of wear and tear, kitchen and bathroom need some updating, etc.

If I sold it for $230k right now, after closing costs/realtor commissions, capital gains tax, cost of the needed renovations, and mortgage payoff, I expect I'd net about $80k. My plan for that $80k would be to payoff or significantly paydown a home equity line of credit on my primary home (balance of about $70k) and do a bit of renovations to my primary home.

Monthly payment for the HELOC on my primary home is about $400, vs the monthly net rental cash flow I'd receive of $700 on the condo rental, so from an overall monthly cash flow perspective, I benefit from keeping as a rental (vs selling condo and paying off the HELOC on primary home).

With inflation being crazy and cash losing value by the day, I understand that real estate is considered to be a good place to store wealth because real estate values rise with inflation generally. But then the risk is that property values crash, making it easier for people to buy homes, meaning market rents will drop too, which could result in me losing the new tenant at lease expiration and then monthly rent on replacement tenant dropping significantly. And of course there's the risk that if the time does come that I wish to sell in the future, values may be down from where they are now.

I'm presently leaning toward keeping as a rental unit due to the additional monthly income, and the fact that the mortgage ends in under 10 yrs will be an even nicer increase to monthly income at that point (and will help eventual retirement!). But of course I see the pros in selling too (and risks of keeping it) as described above.

So overall, these are the things running through my head about it. What do you all think? What would you do in my shoes? Keep as a rental or sell?

Thank you!!