Rent, Sell, or Reinvest?

[Natalie C.]

Hello everyone!

Baby investor here!

In April 2012 we bought a single family home near Fairfield, CA, about 10 minutes from Travis Air Force Base. The house was purchased for 190,000 with 0% down (VA loan) on a 30 year mortgage. Our current mortgage is $1,151/month, with an outstanding principal balance of $116,536. We house hacked - we lived in 1 room and had roommates filling the other two rooms, creating good cash flow while we lived there.

My husband is active duty Air Force, so in July 2016 we PCS'd from California to North Dakota. One of our old roommates wanted to stay in the house, so they now rent the house for $1,700/month. This is definitely below market rate (could probably rent for around $2000/month), but these are unicorn tenants and they are managing the property very well (small landscaping projects, small home improvements).

The current value of the house per Zillow is $383,000.

I am originally from the Bay Area so we plan to settle in Northern California once my husband is out of the Air Force in a couple of years. We are interested in investing in future single family or small multiplex homes, but will likely wait until there is a market downturn.

Capital gains tax exclusion sounds best, as we lived in the home from 2012-2016. With military it looks like I can suspend this by 15 years.

What would you all recommend, and why?

1. Hold onto the property and continue renting?

2. Sell and claim capital gains tax exclusion, and then re-invest in other properties (at the market downturn, whenever it occurs)?

3. Just hold out and refinance when we're ready to start buying other properties?

4. What else????

Thank you all so much! And please comment on any tips that you may have to improve my critical thinking skills here!