Rent or sell current primary residence in SF Bay Area
Hello,
I hope what I'm about to write is clear.
Step 1)
Our 3-5 year plan move from California to Tennessee and in the meantime move back in with my mother and rent out our home (comparables rent for $3,000 and our new mortgage is $1,870). While living with my mother, we would get her house ready to sell or rent (needs major cleanout). We purchased our home in 2011 for $335K. Refinanced to a 15 year FRM in 2014 (got $70K cash out) and remodeled kitchen, added a back deck, installed French doors and replaced windows. We are currently refinancing back to a 30 year FRM, and the house is now worth $660K.
Step 2)
Sell our home (netting $400K or so) use profits to purchase land / house for less than $120K and use remaining funds to invest in rentals to become financially independent within ten years. Moreover, we would sell or rent my mother's house (valued at $270K rent for $1,700) and she would live with us.
So, I have a few questions:
1) If we rent our house for more than three years (triggering the capital gains tax) will we be taxed on the capital gains based on the original purchase price ($335K) or the value of the home when we start renting it ($660K)?
2) Using the BP rental calculator it said, we would have a cash flow of $325. Does this sound right? I know I'll need to budget for repairs and expenses but $800 a month in expenses seems excessive. But, I only just started learning about real estate investing this week, so I know little to nothing.
3) Assuming that we sell the home and net a few hundred thousand dollars, would it make sense to purchase rental properties outright or make down payments and mortgage the rest?
Thank you for taking the time to read my long post and for any advice you might provide.