STR/LTR/SELL ... I can't decide

[Caleb Drake]

Putting this out there for myself and for the masters of the minds to give me feedback. I cannot decide which direction to go. Originally, I was thinking "sell! sell! sell! I hate my neighbors and this HOA and I can use the equity to buy another rental and have some buying power for a possible flip." Now that I am running the numbers, I'm not so sure. I WOULD LOVE TO HEAR YOUR ADVICE AND OPINIONS.

Property details:

• 3/2 SFH with HOA, community pool, private pier in NWFL.
• $216k, 3.1%, $1200/mo (Conventional Loan [refinanced from VA], no money down, 30 year Fixed Rate)
• BRAND NEW Roof ($19.5k insurance claim, cost me $1k), Newly fenced in back yard, Original AC Unit (Circa 2000)

STR (Rented 10 months of the year while I was deployed)

• $27.5k Gross (~80% occupancy rates)
• $20.5k Net (Estimated, I don't have my tax returns handy)
• Monthly CAPEX (including supplies): ~$500/mo
• Speculative Potential: $32.5k Gross Annually (~$24.5k net)
  • Based on the performance of my other STR, I could net an extra $4k on this home if I marketed better and adjusted my prices. I left some money on the table being new and displaced.
  • Thinking out loud: Home is approximately 4 miles from the beach. I have 2.5 years of rental history but this home has never been strictly on the market as I come and go when I'm not deployed/mobilized. I have a good network set up for STR via AirBnB that I use for my other home also, but, honestly, I don't know if I want to deal with the hassle for an extra (speculative potential) $4.5k that is not guaranteed in this COVID environment. Another draw back is (currently) the banks will not use any of my STR income when considering my D/I ratio for future lending. My forever home we are building is a VA no-money down and I had to get an approval from management because of my D/I ratio since $30k of business income wasn't accounted for. With a LTR, the contract and two months of current payments is enough.

LTR 

• Rent: $2000/mo (based on CMA from the MLS)
• CAPEX: $300/mo
• Cashflow: $500/mo
  • Thinking out loud: I have the luxury of military families in this area and the vacancy rates would stay fairly low. The recommended rent from the CMA is $2000/mo. The high end in my neighborhood is $2400/mo. I am thinking "do I rent it out for 2-2.5 years and then sell it to avoid Capital Gains Tax or do I keep it longer and just 1031?"
• SELL

• $216k loan balance
• Appraisal before new roof/upgrades: $285k
• Broker CMA: ~$299k (under current market conditions, wouldn't be able to list for a couple of months)
• Equity: $65k  ($299k - $216k - $18k) 
  • Thinking out loud: I hate my neighborhood and I'd love to be gone. They caused me a lot of problems when they found out I was STR even though it was not against the CCnRs. We are talking lawyer level problems all while I was deployed... But, the neighborhood is very sought after and houses are going within a day or two in this 'hood. I am working on my realtors license and should have it before I can list. If not, my realtor/investment partner is willing to assist me in a FSBO. If I do not do that, I'm looking at ~$18k in realtor fees/closing costs if we didn't negotiate any of the buyer/seller expenses. This includes a home warranty for the AC unit.

My Conclusion:

The more I think about it, the more I want to keep it for the time being and rent it. My end goal is to expand my real estate portfolio, but I would be leaving a lot of money on the table in transaction fees if I sell and buy another property now. I have enough cash reserves (and cashflow) to buy another property (with my business partner) in the next year. We are splitting the down payments and expenses and using an LLC for income and tax management. The cash-in-hand would be great, but the cashflow on this property is better than I will get on a new property in my current market.