Should I sell this single family in Seattle, Washington?

[Colin H.]

Hi All,

I've been a member for a while now and have learned a ton. Thank you to all who post and share their experience and knowledge.  I am looking for some advice as to whether to keep my single family or sell now while the market (in the Seattle area) is hot.

Original purchase price (2011): $540k.  Current Value: $775k.

Remaining loan: $385k at 3.625% (30-year fixed).

If I sell, then after fees/costs I would net about $335k.

The principal, interest, taxes, and insurance is $2575/mo.  It will rent for $3,750/mo.  It requires virtually no maintenance, has no vacancy, and I "manage" it myself -- it requires less than 30 minutes a month.  It is in a great suburb of Seattle with excellent schools and is in a prime location.

The current lease (2.5 years) is up in July.  I have put the property up for rent and have several tenants interested in 3-year leases.  I need to decide whether to sell it this summer or continue to hold it as a rental.

My options are as follows:

(1) Sell and move the $335k to other properties in higher cash flow markets (i.e., 1% or better);

(2) I have a HELOC for $140k (that I'm not currently using). I could use that HELOC and get my $140k out and invest it somewhere else. That would leave me with none of my own money in this house and the rent would still cover the payments. Depending on the interest rate calculation, I could also refinance it and get a new 30-year fixed loan on $550k. It would cash flow about $400/month.

(3) Rent it and put all the rent towards paying down the mortgage (pay off in less than 15 years).  I don't need the cash flow right now so this is an option, although it's my lease favorite because I want to continue to build a real estate portfolio.

I am leaning towards (2), which I view to be similar to the BRRRR strategy, except that my increase in equity came from the housing market rather than a renovation. I can now refinance, get all of my original money out, and have someone else pay off the mortgage. It would also allow me to diversify by keeping this property in an area that has a lot of long-term equity upside, and invest the HELOC money in a different market (with higher cash flow).

I think the housing market around Seattle will cool in the coming years, but this is a long term play for me.  If I decide to hold it now, I would probably hold it for the next 15 years or so.

Thoughts?

Thanks in advance.

-Colin