Here are the facts:
- We bought a duplex in Miami in 2014 (towards bottom of market) for $290k with 20% down.
- Current mortgage balance on duplex: $232k
- HELOC: $120k (only used $60k so far on new house)
- Current market value: $800k (reasonable estimate, could go a bit higher in current market)
- Monthly mortgage (P+I included): $2,500
- Monthly rental income: $3,700 (could increase to $4,200 next year with new tenants)
- Monthly yield (not including maintenance): $1,200
- We lived in the duplex as our primary residence up until October 2020. We would be exempt from capital gains tax.
Our current home we purchased for $600k less than a year ago and is now worth around $700k. We have a 0.9% interest rate. We want to invest about $100k into remodeling it. It’s over 4 miles inland from coast. We use current rent income to offset existing mortgage but we don’t depend on that and both just got significant promotions.
Duplex is in a location that is high risk for sea level rise and storm surge however it’s in one of the most in-demand neighborhoods. It is 1930s wood-framed so maintenance is high (less so after all the work we’ve put in). We put in new electric, new plumbing, re-sided with hardie board, brand new really high end kitchen and bathroom, brand new roofed 40×16 deck, all new impact windows. Still needs roof in next 5 years (estimate $9k). Finding good tenants is a lot of work in Miami. Current tenants are due to leave in September.
After HELOC (assuming we spend it all), realtor commission, we’re looking at potentially $400k net.
We have two elementary school aged kids. No debt other than the mortgages, HELOC and two leased cars (no credit cards, no student loans, etc).
My question is, would it be better to sell and invest in index funds (or is there a better alternative?) or would it be wiser to hold on to the property? What percent yield could we reasonably expect on index funds?