Sell or rent investment property?
I have a new construction home that my husband and I built in 2020. We are trying to decide if we should sell or rent. If we sell after living in it for 2 years we would make about a $800k return ($400k of this amount would be profit). If we rent both the main house and ADU we would profit $24k a year (after you minus all fees related to renting). The property is in a high demand area in Oakland. Selling it would yield a great return now but we don't know if taking this route would be worth missing out on a great passive income stream for the future. Would appreciate any advice from those who have had to make a decision like this, thank you!
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Hi @Tecsia Evans. With California tax rates where they are and federal tax rates potentially going up, I would take that tax-free profit and reinvest it into a passive investment.
There are mobile home park or self storage or apartment syndications, as well as diversified funds, that will likely pay more than 6% annually and provide tax shelters in many cases. You won’t have to worry about vacancy or damage or property value declines.
On the other hand, you will be trusting someone else with your money and you will have no control over it if you go this path.
Another option - if you want more control - would be to take that $400,000 profit and buy two rental Airbnb‘s in prime locations with 20% down on each. Assume a price of $1 million. I have a friend who has done this multiple times and is cash flowing approximately $50,000-$75,000 annually on each home with very little effort. I wrote about this in a recent BP article in fact.
Happy Investing!