Hey Dan,
You’re in a great situation with this house, it’s a high level problem to have. One metric I love to use in your situation is “return on equity”. If your costs are $3500/month and it rents for, a best case scenario, $5000/month, you are cash flowing $1500/month. That is $18,000/year. If you divide that by your equity of $580,000, your return on equity is around 3%/year, and that’s best case scenario. At $500/month, your ROE is a little over 1%. Regardless of the great financing terms, it would be pretty easy to sink that equity into another investment property that beats that 1%-3% annual cash flow return. Obviously there are some appreciation and tax benefits, but another investment property will also have those same benefits.
Oftentimes, the 1031 can definitely be a leap of faith when you don’t have another property lined up to purchase. But with those return metrics, you could park your money just about anywhere else and get a return of 6%-10% and be making more money with that equity. I would hook up with an investor focused agent, whether it be local or out of state, that will really be able to help you find something under the time crunch of the 1031 to avoid those capital gains.
The other thing to consider that is that if you lived in the home for the 2 of the last 5 years, and are married, then you won’t pay capital gains taxes on the first $500k of gains.
I hope this is helpful. Feel free to shoot me a dm if you want to discuss in more detail.
