Thanks for the response. Part of me feels we should keep it as is and just raise rent to $1100 when the lease is up (will have no issues getting it) knowing that we're building equity and it will be paid for in 11 years. The other half of me sees the equity as the perfect way to expand and start a little rental empire. Will definitely have to talk with DW more and go through our options. Thanks again!
It's worth 112k. You owe 71k.
Minus say 10% to sell (Realtor fees, closing costs, any minor fix ups needed from an inspection, etc.). That leaves about 30k. Minus taxes on the gains (say, 25% on the 112-91k selling/buying difference = 5.25k. Depends on how long it was a primary residence vs rental though). You're left with about 25k.
I mean, it's nice to have, but it's not that much equity, frankly--you think you'd be able to use that to get more than one rental, in your area? (I don't know where you are, so I couldn't say.)
I'd guess no, because banks will typically want 25% down for a rental, and won't lend on amounts < 50k. So the purchase price has to be at least 66k (so that 75% of that, after you put 25% down, is 50k or more). Meaning the downpayment has to be about 16k or more. So with 25k, you wouldn't have enough to do 2.
The frictional costs that cut the equity from 41k to 25k is why I said I'd lean towards keeping it, since you already own it.
I'd just work on saving up the down payment for the next one. And then the next. Get 30 year mortgages, and roll the cash flow into the next downpayment, not into paying down loans at low rates. Eventually you may do a massive refi on the portfolio or something once you have significant equity, but for now, it's just the buildup phase.