Sell My High Equity Current Home or Make it a Rental?

[Jonathan Morgan]

I live in a nice home in Miami. Although, our family is outgrowing the space. We are considering moving. If we move, we have to decide what to do with out current home. Should I make my current high equity property a rental, or sell it? A few very important notes:

1) My current home has relatively high equity (>$250K), due largely to local value increase the last 8 years.

2) Current property could be rented to net >$1000K/month, after all expenses.

3) I would pay capital gains on any later sale of the house if I sell my house after renting two years. Capital gains would be >$50K, which would be ~4 years of cashflow income on the property.

4) Considering cash-on-cash ROI, making my property a rental seems to me to be a good idea. Although, considering equity to cashflow, making my property a rental seems to me to be a bad idea. That is, I purchased and renovated my home relatively cheaply. So, cash-on-cash return would be >24%. Although, maybe I should consider opportunity cost (what opportunities elsewhere I would forfeit if I don't take out the home's equity be selling). The home has a relatively large equity. (Annual cashflow)/(equity) is ~4.8%, which is not good. Perhaps, then, I would do better to sell my current property, avoid paying capital gains today, and purchase rental property elsewhere in the country that would see better returns, even after paying management companies.

Thoughts? Am I missing something?