Brand new investor! What to do previous primary residence?

[Mark Miranda]

Hey everyone!

I bought a house back in 2012 in Denver. I didn’t know it would be a great investment back then, I mostly didn’t want to move every year because of possibly raising rents.

Fast forward to 2020, my wife and I have our first child and we’re looking for more space, different schools and to be closer to family.

We had enough money saved to put 20% down on around 500k so we didn’t immediately sell out first house. After a lot of hemming and hawing, I reluctantly agreed to rent it out with the hope of finding a good tenant. We found someone at the periphery of my social group that I wouldn’t be sad about if he ended up trashing the place and we weren’t friends anymore.

We put the tenant on a 1 year lease for $1500/month which is likely ~$300 under market value for size, location and amenities. I’m unsure if he’ll extend the lease.

My current plan is to put the house on the market when I can’t find a good tenant or around 2.75 years to take advantage of the capital gains exemption and then use some of those proceeds to buy a rental somewhere else.

Here’s my question: Is this a good plan? Im brand new to real estate investing. Here are my current numbers:

- We owe 140k on the house @ 3.5% and 30 years left, monthly payment is $1019 (includes insurance and taxes). (We refinanced from 89k @ 4.0% when we moved to finish our new basement.)

- Like I said above, the rent is $1500/month, lease ends July 31, 2021 and is ~$300 under market values

- Zillow and Redfin value the house between 380k and 410k