Long post, I'll apologize in advance :)
For reasons I'll explain below, I've been dead set on selling this house next Spring, but have started to reconsider. I appreciate your comments! I considered selling my previous primary residence in 2013, but decided to rent it instead. Been rented since Jan 2014 to great tenants! Lease runs through Spring 2016.
Current Market Value ~ $375k-$395k
Original Purchase Price = $250,000, with $25,000 cash at closing. About $30k in remodeling since.
Interest Rate = 2.49%
Mortgage Terms : 5/1 ARM, fixed @ 2.49% until early 2017, initiated in 2012.
Amount Remaining on Mortgage = $184K
Equity = ($375k-$184k - closing costs and fees ) = approx $170K? **I am a licensed real estate agent, can save a little there).
Gross Rents = $2,100
Principal and Interest payment of $790 / month
Taxes and Insurance = $600 / month (Property taxes high in Texas, but no state income tax
No HOA
House has a pool, pretty much the main reason I want to sell it. Pool maintenance averages about $200 / month which I "pay", but priced into the rent.
Numbers:
Cash flow of about $400-$450 per month. (roughly $5k year)
Principal Payments of about $5k / year
Straight line depreciation of $7,300, which leaves me with only paying taxes on about $1,500 each year.
Kicker - Appreciation*** been pretty solid in this neighborhood and city as a whole. When I considered selling in late 2013, market value was approx $330k-$340k.
Cash flow alone based on the equity if sold looks paltry if you consider $5k income / $170k equity = 3%
But then I figure about another 3% in principal paydown...
And another 4-5% in appreciation (I know I can't count on this, but our market is scorching right now with multiple offers, low inventory and homes selling for over list price).
My main reason for wanting to sell is: If I sell before the end of 2016, my understanding is I pay no capital gains tax under the "primary residence for 2 of the last 5 years", which I qualify for as my last two years I lived there were 2012 and 2013. Rented for 2014, 2015 and 1/3 of 2016 (plan at least). I know I can address capital gains via a 1031 exchange if I sell later, however it seems foolish not to take advantage of this now, and the recent appreciation. Thoughts?
2nd Reason for wanting to sell is the pool. As much as I want to own rental properties, I don't want to deal with the pool long-term for obvious reasons (maintenance, liability, etc...) I've considered removing (filling in) the pool if I consider keeping this as a rental. Thoughts? I've heard anywhere between $5000 and $10000 to do this.
3rd Reason for wanting to sell is the ARM. The first interest rate increase which would be in Spring of 2017 would still be lower than rates that I can currently refi at, but still, rising rates will eat into cash flow, and I can't get anything near the 2.5% I have now.
My general thinking over the last year has been 100%, I'm going to sell in 2016, but I've started to reconsider. The main reason is, I want to accumulate more rental properties, and it's difficult to buy anything with even these numbers in my home area right now. I also have great tenants, and if they are considering staying, I'd be happy to have them. In my opinion, there is further upside as far as appreciation. Relative to other nice neighborhoods, this area is still relatively affordable and feeds into the best schools.
Thoughts?