Rental options -> Sell, Keep, 1031?

[jetweed]

Hi all, just wanted to say thanks much for this community! Lots of good reading on here...

Here's my predicament, I've owned a rental property for about 17 years, with about 13 years left on the mortgage.
It's in the central valley of California, and went from 255k -> 110k back during 2008, when I decided to leave this area for another one.
2008 value: 275,000
2012 value: 130,000
2016 value: 230,000
2020 value: 278,000
2021 value: 340,000-375,000 range

Either way, I managed to get good tenants who overall haven't given me many repairs, but I'm starting to question what I really should do with it, since I feel like I've had this house for so long.
Property about 5 mi from a UC

As an aside, I've noticed college student renters are getting 700 for a master bed, and 5-600 for the other rooms (I have 3 bedroom 2 bath setup. But you get college students...here I have long term renters.

Either way, would love your take on this, here are the stats (including depreciation recapture from the years):
With my current income (about 100k):

Market Value: 375,000
Purchase: 255,000
Initial mortgage: 247,000
Remaining balance: 135,000
Interest Rate: 3% (I talked it down in 2010 from 6%)

Mortgage length/remaining: 30/13
Monthly mortgage: 1500 (includes property taxes, not insurance)
Rent (1485) - Prop Management (112) - Water (114) - insurance (94) - landscaping (100)  = 1065
Loss this year: about 7,500

Roof will probably need a replacement soon, last one was in 2008.
Furthermore, prop manager counseled me to raise the rent from 1400/m to about 1485 (6% limit). Is this right?

Furthermore, with my current depreciation and income I got some numbers from a friend:
Sell now for 375,000.
Closing costs 37,500
Federal taxes 35,000
Cali taxes 17,000
Balance 135,000
-----------------------
150,000 profit

Sell in 5 years for 435,000.
Closing costs 43,500
Federal taxes 56,000
Cali taxes 26,000
Balance 85,000
-----------------------
224,500 profit

I can make comfortable payments on my primary residence as of right now (even on a 15 year). I'm at about 275,000 left on that mortgage at 2.35%

Just wondering if I should sell, hold, or do a 1031 into something I might like to rent and then keep (smaller beach property)...

Thanks for any help!

[Dicey]

That roof should last for another dozen years or so. Plenty of time for the new owner to enjoy it before they have to replace it.

[franklin4]

The only reason to keep it is the potential for future appreciation. It looks like you are considering selling in 5 years. If that's what you want to do, I would refi the mortgage into a new 30 year loan to drop your payment way down. If you get a no cost loan your rate may increase a little but it would still help your cash flow.

[PMJL34]

Sell right now, like I mean today, while the market is hot.

You have lost money on this rental for the past 17 years. Cut your losses and take whatever profit you can.

Best of luck!

[srad]

I'm curious, what is market rent for this?  I think you are really low on rent, 1400?  your pm sucks, there should of been steady raises in rents over the years.  Now you are dealing with rent control so getting it up to market with an existing tenants will never happen.

This looks like a sell to me, you don't seem to involved in it, take the cash and do what you wish with it. But if you are going to keep it,  Like Franklin said, refi this.  a 135k mortgage on a 30 year is going to be less than 600 a month for the prin and int payments.  At least you'll stop losing money each month.

[jetweed]

Wow, logged in a while back, leaping lizard comments!!! Thank you!

Just got rent to $1485. Zillow estimate $1525.

I'll definitely check into a 30 year, I know from a person that I can't get this below 3% for a 15 year though...

Any thoughts on a 1031 exchange...imo it's looking like I should...

[srad]

1031 is the ONLY way to go if you want to sell this and stay in real estate.  Question is, where/what are you going to buy?

You are correct, your rate wont be below 3%  But if you amortize it out for 30 years that payment drops significantly.  I wouldn't go the 15 year route, get a 30, take the extra cash each month now.  Inflation is your friend in real estate, those 30 year fixed payments feel start to feel smaller and smaller as the years go on.

[jetweed]

Yeah, that's the thing for the 1031. If I would have to buy, I would have to look at similar properties and would want to research something closer to a coast.
But that's dreaming until I get the research in.

Currently, I live on the Central Coast, and prices are sky-high. So, I'd be thinking potentially a lower-coast-near-the-coast area and NOT the CA central coast. Northern CA? Oregon? Short Term Rental?

This is definitely looking like either:
1) Get a 1031, get the 'no dep-recapture' bonus, find something along the coast that would appreciate better, keep playing the dep. recapture game for life.
2) Pocket cash, use it to invest/pay off current mortgage. Be done with rental ownership for now
3) refi. Do we suggest here that with more cash flow, the 3.5% 'cheap money' would be better used somewhere else to build wealth? Gosh, with the way the market is as you all might know/suspect I could sell the place without having any remodeling. Wondering if this is an ok thought process.