It depends what your goals are. If you want to build up a rental portfolio and that property is cash flowing, it may not make sense to loose the cash flow if you aren't able reinvest the money into something with equal or greater cashflow. If it isn't performing well enough to get you to your goals, it's definitely worth considering selling or refinancing it. It seems like everyone "wants to buy a house" in the next year or two, but not a lot of people actually act on that. So you may just save up for the make-ready and hope they end up staying longer.
I started looking into the numbers last night some more and I realized the estimate for my home has gone up 12% in the last year or so. When my tenants new lease ends next year do you think it would be a good idea to just re-rent the house for more so I do earn a cash flow with a possible refinance? instead of selling? the only thing I was trying to avoid was any major costs to repair that wont be covered with there security deposit .
Are you going to make a profit if you sell the house?
Check rentometer.com to see if your rent is lower than market. If you can't get any money out of it, I would sell it.
It doesn't sound like refinancing is an option. If your house went up 12%, I don't think you will have any money to take out. When I looked around for a HELOC, I was able to go up to 90% LTV on my house which would get you only 2% out. I guess you could look to see if you could get a refinance for 100%, but I haven't seen one of those.
If you think you will benefit from some appreciation, you could keep it, but if you are looking to make cashflow I would sell it. You may be able to get the current tenants to do a lease option, where they basically give you a deposit for the opportunity to buy the house in the future. If you do this, you get some money you could put towards purchasing another house and you continue to get the income from them as they rent from you. They are also likely to take care of the place better if they think they will be buying it.
Wow, a $500 a month jump? That would be pretty good. You are right that the increase will scare off your tenants, but in order for you to make money in real estate, you are going to have to do things that people do not like.
Most real estate agents do not know how to do a least option. If you are interested in doing the lease option, I would research on this site as much as you can and see if you can find a lawyer who can help you draft up an agreement.
So how much more is that then what you get now? I would renew at market. I would charge extra for the month to month but that is my area. I would also ask for a payment on written notice of termination. Here winter terminations are difficult to fill. People change when they give notice mentally they move on. Also put a clause saying they must allow you to show.
They probably want RENT with the OPTIONs to PURCHASE meaning the rent will be used to reduce the asking price. I suggest you not do it. But you can tell them before lease ends what you want out of it.