Personal Investments • Should I sell or continue to rent it out?

Hi,

I own a property, and I am deciding whether to sell it or continue renting it out.
I lived in it for more than 2 years in last 5 years so it is free from capital gain tax for $250k. This is the main reason I am considering selling it at the moment, and I still have about 1.5 years for this benefit.

I just got married, and I have no kids. 

My net worth, including my retirement account and primary property, is about $2.3M.
I am 34 year old male.
Both of us are W2 workers in big tech companies.

My annual income: in the $400-650k range depends on company stock

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The options I am considering:

• keep it and continue to rent it out(next year the monthly rent will be $4000, but cashflow is still bad). Risk: if the tenant do not want to move out next year, I will miss the opportunity of $250k capital gain tax exemption.

• sell it and invest the cash somewhere else

• keep it and make it a long-term rental property, and do not consider selling it at all.

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I initially purchased the house as the primary residence in 2017 for **$780k**. 
Down payment: about $200k
Mortgage left: $516k
Interest rate: 2.5% (refinanced in 2020)
Location of the property: Seattle (in Ballard)
Current estimation on Redfin: $980k ($0.92M - $1.1M), on Zillow: $1M ($0.97M - 1.07M)
Assuming I can sell it for $980k, I can get about $380k back, after deducting the fees(e.g. agent fees, taxes, staging fee, repairs etc.).
In the past 7 years, the average return of the house ($200k -> $380k in 7 years): 8.9%. It all depends on if I can sell for $980k.
One agent says I can only sell for about $920k and another said I can sell for about $1M.

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I've tried to rent the house out for one entire year, here is the summary:

• Income from the property management(after deducting the management fee, repairs etc): $36,711.57

• The mortgage, insurance, and property tax I've paid in 12 months: $36960

• So, after a whole year, it was actually negative: -$248.43 profit.

• If I include the mortgage pay down it would be: $13440 (principal) -$248.43 = $13191.57**

• so, **including the principal paydown**, the overall profit is about 3.47% of the $380k.($13191.57/$380k)

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My concerns about keeping the house:
the cash flow is not good
too much equity in a rental property
What I like about keeping the house:
interest rate is pretty low (2.5%) and monthly payment is very manageable($3070/month).

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Thanks in advance!!

Statistics: Posted by calm_richman — Mon Jul 22, 2024 9:02 pm — Replies 8 — Views 692

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