Ok helping a friend out deciding something - this is in the USA.
They currently have 100% equity in a rental house. Their purchase price was $132,000 plus around $65,000 worth of upgrades before it turned rental. Call it $200,000 even as their investment in this house.
Rental house generates $2500/mo on average as a vacation rental. This does require some effort from him, but not a lot. Say 2-3 hours a week max to maintain the place and keep it ready for guests. Insurance is around $2000 a year, taxes are low.
Since there's no mortgage, the only real costs are utilities (electric is very cheap) and insurance ($2000 a year). Taxes are cheap.
So they are netting somewhere around $27-28,000 a year.
Here's the thing we're trying to figure out:
The house has appreciated greatly, from what we can tell, since they bought it 5 years back. Houses that are comparable in the area now sell in the $400,000's. He thinks they can get at least $400k for it, maybe more. There are already several people asking and two offers.
This person is a decently learned trader who is up 50% this year on his investments. Their plan would be to take 2/3 of the money and put it in "safe" spots, ETF's, bonds, even just keep some in a HYS for a safety net. The other 1/3 would go in a family brokerage account to be used as more active trading capital. I do realize that the market has done great this year but this guy is also showing himself to be a decent trader who has had a few nice wins and is ahead overall since he started getting educated about it all.
We figure that even at a very modest return per year of say 7%, that $400,000 would generate $28,000/yr ... is that not better to have the money working that way instead of having it tied up in a property?
This property is definitely subject to fire and water issues (western USA) ... nothing yet but it feels very much in the cards. Insurance premiums are also skyrocketing as of late in the area.
Is it a smart move to sell?