Analysis Paralysis - Help!

[Dave S.]

Hello friends!

I have a townhouse in Newcastle, WA that I purchased for $200,000 in 1999. It is worth $400,000 today. The cap rate is 1.68%. My mortgage is $65,000 at 3.5%.

In 2016, my household will earn $160,000.  In 2017, our medical training will be completed and our wage will increase to $400,000.  We have good credit (800) and will likely buy a $400-800k house in 2017. I also plan to buy/open a medical practice estimated at $300k in 2017.  We also have $400,000 in student loans at 3ish%

If you were in my shoes, what would you do?

1) Nothing-- Just keep renting it out and pay off the mortgage.
2) Sell the property and buy 2 smaller properties with higher cap rates using like-kind exchange
3) Sell the property and use the money for student loans, house and practice purchase.

Or something else?

My goals are to maximize long-term value; cash flow isn't important. I do not want to be an active day-to-day property manager, but do like to be a part of big decisions. I am considering getting a realtor's license just to have a better understanding of things and also because of the high amount of transactions I'm going through.

I have analysis paralysis and would appreciate your insights. Please help!

[Cal C.]

I'd absolutely sell the townhouse.    If you are going to buy RE for your practice I'd check to see if you can 1031 into it.  If not then I'd sell it and pay the taxes this year since you'll be in a lower tax bracket.  I'd also hold off buying a new house until the medical practice got rolling.  Renting is an option.  

The position you do not want to be in is this.

$65K owed on a rental property.

$600K (+/- $200K) owed on a personal residence

$300K owed in student loan debt

$300K owed on a purchased medical practice.

Brand new Business (at least for you) and you are $1.265 million in debt.  

By renting for a while and selling the townhouse you'd reduce that debt at least initially to basically $300k.  Think about how much that would reduce your stress level.  

Some other comments/questions.  Why is the current practitioner going to sell a practice making $400K a year for $300K?  It is very difficult to start up a medical practice even if you are buying someone else's.  I'd guess it may take you a year or two to build the practice back up to where the former practitioner had it, unless he/she was being totally lazy and was passing up business.