What to do?

Hi,

With the wealth of knowledge from TI folks, wanted to solicit your opinions and feedbacks (things to consider) on the dilemma that we are facing.

Scenario
Currently we live in an attached townhouse with dual HOAs (master, sub) and high mello roos, together add up to ~$800. We are in the processing of upgrading to a SFH and the financing to purchase it would not require the selling of current home. So here are some of our options:

Option 1: Keep the townhome as rental for the long term. Based on our equity on the home, it would cashflow positive ($300-400) each month

Option 2: Sell the townhouse since market is insanely hot right now in this price range (< $850k), also to get the capital gains exemption status for primary residence since we lived here at least 2 of the last 5 years. Then wait to buy a lower cost rental unit (lower HOA/mello) when interest rate goes up and price goes down a bit

Option 3: Similar to option 2 but instead of buying another rental unit just use that townhouse sales proceeds to pay down the SFH and be debt free

Wanted to hear from you the pros and cons of each option.

Or maybe option 4 where you rent it out for 2+ years after you move out and get some more appreciation since you are cash flow positive.  Then reassess in 2 years to see where the market is.  If you have enough built up equity in your townhome then maybe when you sell it you should buy 2 rentals. Happy to run you rental comps for your townhome, just PM me your email address and specifics on the home. 

Due to prop 13, I never sell.  How do you win in monopoly? You collect properties.
Also i'm 2 lazy to move my money from one asset 2 another.

But mainly because prop 13.  I have a house where all the neighbors pay about $6,000/year in property tax while I pay $2,300.

Option 1 for the long con.


Imagine it's 20 years later, and houses have tripled...yeah your neighbors who just bought are paying triple the prop taxes.