Sell or keep as a rental - St Petersburg, FL

[Dustin Baldwin]

So, since I am new to the world of real estate investments and I am trying to set my rental home business up the correct way, I need some advice. 

I bought a home in St Petersburg, FL as my primary residence 3 years ago. Its a 3/2 and I rented out the other 2 bedrooms at $500 a piece, essentially covering the mortgage, taxes and insurance. I did not put anything down on the house because I used my VA home loan and everything was financed. Original Loan amount: $165K

A year after living in it, I moved for a work opportunity and rented out the master bedroom for $600/mo. I now have it rented by room for $550, $550, and $600 ($1700/month). 

My dilemma: I have 3 options and I need some advice here to figure out what the correct investment decision is. 

Option 1) Continue to rent it out by room. I have very good tenants. A Police Officer, Financial Advisor, and a security guard. My expenses are $1038/mo and I clear $662 in cash flows. Renting it out by room seems to be easier than by house so far. 

Option 2) Rent the entire home out for about the same amount. Less tenant turnover which will be good once I start purchasing more properties. May be able to get $1750/mo 

Option 3) Sell the house and use the funds to start purchasing homes that are better suited as rentals and meet the 2% rule. (as this one does not). My original loan was for $165,000, currently $156,500 owed. I have not put any of my money into paying the mortgage, it has been all tenant. The public record lists the home valued at $195, CMA at $175. Realistically I could probably list it for $190 and sell it within 30-45 days.

My only hesitation is that the flood insurance rates are supposed to increase by a lot in the next 1-2 years in Pinellas County. This house is not in a flood zone, a mile from the beach, new movie theater and mall, and is the area is growing quickly. 

Pro's of selling: Free up VA Loan, cash the equity out, buy a cheaper home for the purposes of renting vs Primary Residence, TVM.

Con's that I can see: Risk selling too early in a Sellers Market when flood rates are going to force people to move into non flood zone properties and demand is going to skyrocket. This is only a theory. 

Sorry this post is long, but any suggestions or help is greatly appreciated! 

[Patrick Liska]

selling and buying a cheaper home doesn't mean you can rent it for the same price ( unless you find one in the same area) your cash flowing $662 / month, that's pretty good, i would hold onto it. your not loosing money on the house, why not wait and see what the market and area does for you. if this is not in the flood zone than you have nothing to worry about and is better for you. it seems like you have some good professionals renting from you right now that i am sure take care of the place, and what better security system is that to have living right in the house, i would continue renting by the room until you have trouble doing so.