After doing some math I feel like I already know the answer but I wanted to pick your brains anyway.
My wife and I purchased a rental property for $250,000 in Austin, TX, just in time before COVID hit and the market exploded. Today, less than two years later, we could sell for around $400,000. Given that we still owe $175,000 to the bank and assuming a realtor commission of 6% we could walk away with a very healthy profit of roughly $200,000, or around $170,000 after capital gains tax, to reinvest. If we reinvest the entire amount in the stock market by 2040 we will in theory have:
3% average return: $300,000
6% average return: $520,000
9% average return: $880,000
On the flip side we do currently have tenants paying rent, and they have no plans of moving anytime soon. We are already making a small profit of around $200 per month, we can deduct the mortage interest as well as tons of other expenses from our taxes, and the house will appreciate further even if it won't be nowhere near as explosive as it was in the last two years. With an average appreciation of X percent per year and including average estimated tax savings and a stable and consistent rental income and average rent increase of 2% if we sell in 2040 we will make:
1% appreciation: $380,000
2% appreciation: $480,000
3% appreciation: $600,000
I realize that both scenarios include variables and unknowns (market fluctuations, long-term vacancy, unexpected repairs and upkeep) that I cannot account for.
The question is: what would you do? Sell and reinvest or HODL?
