Should I Keep or sell my rental property?
Here's what I did, some of which may have been non-mustacian, but... it is done :P
I sold a rental property in another state, and used the proceeds to purchase a new house in Arizona. I then moved from my current house into the new house and changed my last-lived in house into a rental. (I moved in April 2016). I couldn't do the 1031 exchange for a few reasons (foreclosure, etc.-- I tried).
Now my questions is, I've got appx. $171,000 in equity in my rental (deducting what it would cost to sell it) -- but it cash flows pretty well (I think?)... should I keep it as a rental, or sell it and chunk that money into index funds? I'm expecting to raise rents about $100 each year or two-- we had 6 people wanting the house after being on the rental market for 7 days, so it's in a pretty hot location (and I probably could've rented it for $2150 or so...) My current renters co-own a landscaping design company, so as part of them staying there, they are using the property to train new workers and install lots of really nice landscaping upgrades (score!!)
From my simple calculations, I am still leaning towards keeping it as a rental, but I know that when I reach the 3-year mark I no longer am safe from capital gains on the sale of the home... am planning to keep it at least until then and see if it is a headache or something I can handle and low stress.
Current rental-- 1995 home, 2450 sq ft.
Rent: $2072
Mortgage + pool service etc = $1394
Basic monthly profit: $678
Mortgage left (25 years left?): $175,000
Value of rental: ~$365,000
The house is in very good condition -- we bought it 6 years ago at the absolute bottom of the market here-- have had great growth in equity since.
We live about 1/2 a mile from it, so I can do almost all of the maintenance (if needed). Because the house is in good condition, the only real thing I expect to have to replace is the AC unit at some point, but my cousin is in the business, so I get AC at wholesale price.
Life Situation: Married, 2 kids under 4. Wife is stay at home right now. I've been at same job for 13 years in Arizona.
Gross Salary/Wages: ~110k
Pre-tax deductions: Paying 10% into 401k (+3% matched = 13%) Small amount of FSA ($1200/yr), averaging about $5500 into Roth/normal IRA per year (need to get this to 11,000)
Other Ordinary Income:
I have 2 rentals right now -- the other is a condo that is underwater by about $50k that I 'inherited' through marriage -- the rental income covers the mortgage after tax deductions are taken into consideration, so I pretty much have to sit on this for time being.
Rental Income, Actual Expenses, and Depreciation: Listed above-- I will depreciate the property as per normal. Haven't had any additional expenses besides 1 visit from an electrician at $100, but it has only been 3 months now since it has been a rental.
Current expenses: After all is said and done, I have about $1850 each month left over above all budgeted expenses, not counting yearly bonuses of appx. $15k
Other investments:
Appx. 200k in 401k / IRAs / taxable
Other debts:
*Student loan at 0.75% - 18k remaining ($200 per month-- 10 years left)
*Current primary residence -- $275k loan -- 30 years fixed @ 3.5% -- appx. value = $435k. FHA loan, so PMI is $171 a month (LAME)
*401k loan -- 49k - (used this to get primary residence). 20 year term @ 3%
I am planning to lump the 401k into a refinance of the primary residence in 2 years when my foreclosure drops off my credit -- that will knock out the PMI as well, since I'll still be at about 75% equity.