$100k Profit or Rental?

[Brianna H.]

We bought our primary home in 2011 when houses were DIRT CHEAP. We have always considered renting the house out and buying a new primary, but house prices are through the roof in our area right now. What would you do in this situation? Here are the specifics:

-Bought for $90k, could easily sell for $190k in current market

($100k in profit + $30k in principal paydown)

-10 years left on loan @ 2.9%

-Could easily rent home out for $1500, PITI is $1000

To me, here are the pros/cons of renting / selling:

RENTING

-While we would be breaking even on rental at $1500 (or even paying some out of pocket), we would be reducing our mortgage by $600/mo. (Our goal is 10 paid off houses)

-Newer home = less repairs

-We lived in the home and are more familiar with issues than if we were to buy another house

-2.9% interest on a rental? Heck yes!! 

SELLING

-With $100k in profit, we would not have to pay ~$25k in capital gains like we would with if we rented house out

-Selling would possibly allow us to buy 2 more houses (although I haven't seen any deals I really like lately)

[Jake Thomas]

I like the HELOC option @Account Closed pointed out. Also, with that much equity you can sell it and should be able to buy another primary and at least down payments on two other rental properties, maybe three depending on what they sell for in your market. It all depends on how fast you want to grow the portfolio and how much debt you would like to take on. The Dave Ramsey plan is great of having paid off rentals but one at a time takes forever. leveraging the debt is an investors friend to a certain point. We have a similar situation with about $120K in equity in our primary. We thought about selling this year because we are coming up on our 2 yr no capital gains tax mark but have decided a HELOC is the best option. This is so we can make cash purchases quickly with better clean offers, then the bank that has given us the HELOC can refi the same property within 2 weeks. Good luck, either way its a good problem to have.