Need some advice. Sell house or keep cash flow or....
Hi all,
Quick background: I have a house that I am currently renting out. I still have a mortage on it. My mortgage/ins/taxes is $1200 but I am renting it out $1900 a month, so I am making a little cashflow.
I plan on getting out of the Navy this Jan 2016, also my tenants' lease is up Jan 2016. I plan on sailing around with my girlfriend for 3-8 months once I get out. I have some money saved for this trip but not sure if it'll be enough for whole time (hence the broad window).
My tenants have expressed an interest in buying the property, however, they have poor credit due to them both having gone through a divorce some time ago. (side note: they have been excellent tenants, paying on time, no complaints).
Here are some scenarios I've come up with:
1) Assuming they can get financing, I sell them the house in Jan and walk away with 10-20k in profit. However, since I will be sailing for the following 3-8 months, I won't be able to do a 1031 exchange and will have to pay capital gains tax (which of course I want to avoid). There's no way I can meet the time constraints of having a property identified and close on it in 6 months while I am sailing. (Mostly because I don't plan on coming back here, I will be going to a different state). Also even if I could, I would just be paying rent on a home I'm not living in, and that would limit my sailing time.
2) If they cannot get financing, I offer them a Lease-to-Own option. I would be collecting some cash flow, which would help maintain/increase my sailing time. I would however get a property manager which would cost me a bit off my cash flow. I finish sailing, then when the lease is up I sell them the house OR they decide not to buy and I keep the option fee and continue renting it out while residing in a diff state (any advice on that?).
3) I decide not to sell it and ask them if they want to continue leasing; if they do, then no issues (I keep the cashflow for sailing and possibly sell it in the future). If they don't I have to find new tenants in a rather short window and take the chance that they may be crappy tenants.
Question: If put in my situation, which do you think is the scenario you would go with and why? Or if you can think of another scenario I'm all ears!
P.S. This is my first property and I have very little experience in Real Estate. So if I'm not correct in something or something obvious has slipped my mind (i.e. further complications from those scenarios) please let me know. Your advice is much appreciated.
Also if you need some more background info, just let me know.
Thank you,
Mike Sanchez