Congratulations, it sounds like you've put yourself in a good position. I have a few ideas for you to think about and consult with your CPA, attorney, etc.
If you think you want to sell:Google the primary residence capital gains exclusion. In a nutshell, if the home was a primary residence for any 2 of the 5 most recent years, you can sell the property and avoid paying capital gains tax on the gains.
You could also protect gains from capital gains tax by doing a 1031 exchange. Basically, you would roll the proceeds into a bigger RE deal within 6 months of closing.
Estimate your proceeds from the potential sale.
Sale price minus Remaining mortgage
minus unpaid 2018 property taxes
minus abstracting
minus revenue stamps
minus Realtor Fee
minus seller settlement services
minus termite inspection
minus attorney fees
minusseller paid closing costs (if needed) =
Net ProceedsIf you decide to sell, I would challenge you to keep the proceeds on the investment side of your balance sheet. If you roll it back into a personal residence then you no longer have an asset, you have a liability. Your house is a liability not an asset because it costs you money and provides $0 revenue.
If you get this wrong you will kick yourself later! As Walt mentioned, you're current rent is very cheap and I would continue that as long as possible. Only consider buying if:
- it's cheaper than renting (including maintenance/upkeep)
- if you really want the homeowner lifestyle
- and you can afford it (meaning your retirement and all other needs are met. Some would say only if you are financially independent.)
Jim Collins has some great insight into the rent/own discussion.
If you think you want to continue:
It sounds like you're an accidental real estate investor. This is fine as it's how a lot of ppl get into the game.
But, now that you are a RE investor, you should learn to think like one if you choose to continue: check out Bigger Pockets, The Real Estate Guys Radio podcasts, etc. Read Rich Dad Poor Dad if you haven't already.
Investing in anything always begs the question - As opposed to what? Meaning if you don't invest in this what other more favorable options do you have? Can you make better returns for less risk/headache elsewhere like other properties, property in other markets, stocks, bonds, etc. How does real estate fit into your overall investment plan?
If you didn't already own the asset, would you buy it now? It sounds like home prices have risen quickly in the area. Are rents also rising? Does the property meet the 1% rule at today's gross rent and sell price? Are you getting market rent? Are there big employers in the area, providing you lots of tenants to choose from, and is the community adding good jobs or losing them? Know your market then do the math and the math will tell you what to do.
If you decide to keep the property, I would challenge you to consider going without property management. I live overseas and still manage my properties myself as do many people on these forums. How much value are you really getting from your PM? They do a few hours of work to find the tenant but then they get to collect 10% from you ongoing. That's a great deal for them and can be okay for you if you're already wealthy. If you're still building your portfolio then that 10% is really expensive.
If you decide to keep the property, a true investor would refinance to take out that equity to put it to use in other investments. This depends on your comfort with debt but there's risk in holding lots of equity too. As the saying goes about equity, 'the market giveth and the market taketh away'.
That's probably enough to think about for now!