Rent vs Sale of current home at our 50s while 12 yrs to Retire

[Jil Tin]

Hello BiggerPockets,

Basically we are looking to upgrade our current home to buy a single story home from current two story home of the same size in the same city san Jose. We are aged 55 and 50, we expect to work at least next 12 years and retire at 67 and 62. We have $500k in retirement account, growing at 6-8%, no loans except home loans.

The single story home costs $1.2M while current primary we bought $500k five years before. Current home loan is $350k. Current home can be easily rented for $4000/month or can easily be sold $1.05M. The current PITI is $3000/month which is $1000 lower than rent.

Right now we are debating whether we sell our home or if we rent it out for some passive income.

Here are additional info:

We understand the pros & cons of landlord as we own three rentals, all have mortgage with expenses equals rent revenue. Cash flow negative due to depreciation.

We are eligible to new loans at $1.2M level while keeping current one as rent. Qualifying and down payment is not an issue.

The real issue is our age and retirement.

We both work at San Jose, lot of work stress and takes 12 hours of daily life. Even though we are healthy now, cannot assume same at mid-60s, we need to take retirement or partial retirement to focus on our health and life.

If we sell current home, we can take 500k tax free capital gain and reduce rental mortgages (I can pay off one full mortgage and balance pay off 25% another rental).

If I rent out my current home, it is 30 year fixed at 3.5%, tenants rent will pay all expenses and we will have the home free after 30 years (it will be gone to our heirs as we do not know whether we will live 30 years).

What will you do if you were in our situation? 

Which way is better to be financially independent.

[Account Closed]

Originally posted by @Jil Tin:

The single story home costs $1.2M while current primary we bought $500k five years before. Current home loan is $350k. Current home can be easily rented for $4000/month or can easily be sold $1.05M. The current PITI is $3000/month which is $1000 lower than rent.

Right now we are debating whether we sell our home or if we rent it out for some passive income.

So home 1 has appreciated about $8,400 a month plus could get $4,000 rent and you want to kill the Golden Goose!  Where is your $500,000 gonna earn $12,400 a month and growing?  In 20 years long tern care could wipe out that $500,000 retirement money in a few years.  You don't need cash now so why cash out and squander your appreciation?

Oh yeah, I see above that if you add $200,000 to that you could earn $35,000 a year.  So $12,400 X 12 = $148,800 or about $114,000 less.