What to do with current house? Investor Advice Appreciated

Question

Hi Everyone,

My wife and I are currently living in Raleigh NC. We own 100% of our home in Raleigh. We are actively looking into moving to Charlotte with the intention of buying another home to live in for a year or two and then use that as an STR, once we save enough to purchase another home.

Any advice on what is the smartest thing to do with our existing home in Raleigh? Do we sell and take the cash? Long term rental? STR?

Any and all advice is greatly appreciated.

Dave Foster · Answer

@Brett Hushon, If you have lived in the property for two out of the previous five years you've owned it, you can take the first $250k ($500k if married) of the gain tax-free.

If you rented out the property for less than three years, you would still be within the requirements of the primary residence exclusion.

But, once you convert it to a rental, the property would then qualify for a 1031 and allow you to defer any additional tax left over from the primary residence exclusion if there is any, and reinvest it into another investment property.

If you choose to rent out the property for three years and decide later on to sell it and purchase another investment property, you could still do a 1031 exchange.

A 1031 exchange would allow you to defer all of the tax and depreciation recapture and reinvest it into another investment property that's maybe closer to home.

If you don't need to proceeds from this sale to buy your next house, you have quite a bit of time to allow you to wait to decide what your next steps are.

Kunal Datt · Answer

It also depends on how much profit you’d gain from selling your home. The first 500k profit (if married) is tax free when selling your personal home. Of course there are agent commissions to pay. So that has to be taking into consideration.

I tend to lean towards renting your previous residence whenever possible. You can self manage the property as a LTR and still have plenty of cash flow (since it's paid off) and not have the headache of managing it as a STR remotely from CLT.

I would only do a STR if I was local to the market.

Alan Asriants · Answer

Do you need the money from the House to pay for a home in Charlotte? if not, keep it as a LTR, put in solid people, hire local PM and forget about it. You officially created passive income.

Making it into a STR is likely too much headache for not enough juice, Personally, I wouldn't over complicated it and just stick to traditional rental.

If you however don't have the money for a downpayment for you next house, you can take the money out as a Home Equity Loan, or do a cash out REFI. Home Equity Loan will pay off faster, but will shrink your cash flow. However in your position, I'm sure there is enough meat on the bone.

Good luck

Wale Lawal · Answer

@Brett Hushon

Since you own your Raleigh home outright, you have a great opportunity to let that asset work for you. If the home's in a desirable area, turning it into a long-term rental can generate steady, passive income and continue building equity. An STR could offer higher returns, but only if local regulations allow and you're prepared to manage the extra work—or hire a property manager. Selling could give you cash for future investments, but if you don’t need the funds immediately, holding onto it as a rental is often the smarter wealth-building move.

Good luck!

Ethan Haigler · Answer

I’d keep the Raleigh house and set it as a LTR. Use a property manager, then buy a house in Charlotte either a multifamily where you’d live in one side (house hack it requiring less down payment), and rent out the other side as LTR or STR depending on location. Another 2 options in Charlotte purchase- a. Buy a place needing work (use a hard money loan to finance purchase and rehab), then refi it at a higher ARV (BRRRR method), or B. buy a turn keyplace using DSCR loan. Let me know if you need further help; I’ve got a team that specializes

Chad Gray · Answer

A lot of good replies here so far, however I don't think there is necessarily a "smartest" option as a lot of it is contingent on your current goals and what you're looking to get out of the property. One thing that hasn't been pointed out is that the property has to be your primary residence for 2 out of the previous 5 years prior to selling in order to avoid capital gains. So, if you did turn it into a rental, if you were to sell after the end of year 3, you would now owe capital gains on the profit of the sale. (I'm not a CPA this is not financial advice). If you don't need the equity out of it at the moment, converting into a rental for cash flow and appreciation wouldn't be a bad idea, however I would be cognizant of the potential tax implications.

Pat Lulewicz · Answer

As others have said, this entirely depends on location and your personal liquidity needs. If building a portfolio if your goal and liquidity isn't a concern with your next purchase, I would never sell an asset in Raleigh unless you need to.

Putting an LTR in there is your lowest touch option and you could likely manage it effectively from Charlotte. Shorter-lease unfurnished rentals are another option (and still self manage); we get a lot of those individuals who either just moved here or are between homes and you can get good premiums on those rents.

If you have the capital, furnishing it and renting it as a MTR/STR is definitely going to be your highest $$ return...we manage 6 of these types of properties in the Triangle and there's great demand for them. If you need some guidance on the furnishing aspect, we've done the design/furnishing (white glove: order it, build it, etc) of 2 in the past year so can give you some ideas.

Benjamin Carver · Answer

Hey Brett, I do STR and work with investors here in Raleigh. It HIGHLY depends on the location, house features, and what your actual goals are. I'm going to send you guys a PM, if you want to chat more about what it would look like to rent it out different ways

Christine Mulkins · Answer

You could keep the home, do a cash out refi to access some cash to purchase more rentals and rent your existing home out as a long-term rental. The goal would be to put just enough debt on it so that you still cash flow nicely after you're getting rent and paying any necessary expenses. Because you're very familiar with the home and lived in the area, you can very likely manage the place on your own without needing to hire a PM, thus putting more money in your pocket. This is just an idea to scale your rental property portfolio. Of course, not having the financials on the possible rents and new mortgage if you refi'd makes it hard to analyze properly, but this is just an idea to consider :)

What to do with current house? Investor Advice Appreciated

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