Rent Out or Sell in Austin area

[Sean Craigg]

I'm moving to a nearby neighborhood so the decision is: Do I sell or rent out?

Info:

House value: 850K in a top public school district next to the top school. This is in central Texas, close to Austin TX so it's likely to increase with the big companies moving in.

Rental rate: 3.5K/month (Tenants would be middle-to-high income families with school-aged kids)

The house is almost 20 yrs old so could use some paint touchups, flooring buffing, toilets, etc. but overall in decent condition.

I'm thinking I'll fix these things as a rental so I can deduct it from the rental income and then plan to sell in 3 years to keep the cap gains exclusion as a primary residence.

Rental rate doesn't pass the 1% rule of thumb. How would you make the decision in this case?

Any feedback would be appreciated.