Part of the reason why I bought a smaller house in 2014 was because I wasn’t willing to rent my own house for the market price at that time of ~$8,500/month. The price to rent my house had grown from about $5,000/month when I first bought it in 2005. If I had a couple kids and a penchant for throwing tons of money away on rent, then maybe I would have stayed.

To optimize my finances, I figured the best thing to do was to buy a new house more suitable to my house-spending desires (~$5,000/month max) and rent out my old house at market to those willing to pay $8,500/month in rent. This way, economic waste is eliminated, and everybody is happy.

Conduct the same mental exercise with your existing home. If you haven’t rented in a while, you may be surprised by how much your primary residence can command for rent in the open market. The cost of living in your home isn’t the actual money you are spending to live there. The actual cost is the opportunity cost of not renting it out at market rate.

Let me share with you why it’s important to follow the real estate investment rule of Buy Utility, Rent Luxury (BURL) if you want to maximize your lifestyle and your net worth.

Real estate is one of the best asset classes to build long term wealth. As an owner of five properties, I’ve seen my net worth soar over the past 15 years as my principal values and rents have increased far beyond inflation.

I came close to buying my 6th property, but instead of taking down a Hawaiian dream home for my parents, I’ve decided to invest more surgically through RealtyShares, the leading real estate crowdsourcing platform in America.

Here are three reasons why I didn’t want to own more physical property:

1) Property taxes. I’m already paying over $50,000 a year in property taxes. If I buy another property that costs let’s say $2M, I’ll have to pay another ~$23,000 in taxes a year. That’s just way too much.

2) Dealing with bad tenants. If I were to buy this Hawaiian home, one of the plans was to rent out my parent’s old house for ~$40,000 – $50,000 a year after they moved. Tenants can be great, or they can be a real PITA. The older you get, the less you want to deal with tenants.

3) Too much financial risk. To add millions of dollars in illiquid real estate exposure near the top of the Honolulu market, when ~40% of my net worth is already exposed to real estate seems like a really bad move. It’s much better to invest smaller sums in higher yielding markets instead.

I’m about to make the biggest financial decision of my life and I need your input.

Remember how I was saying in a previous post that I thought there would be a two or three-year slowdown in SF real estate starting in 4Q2015 before its off to the races after Airbnb or Uber IPO? Well, I was wrong! 2016 was a relatively mild year with low single digit returns partly due to an influx of new condo construction saturating the market. However, 2017 has turned out to be very strong with the median single family home price surging to $1.5M, an all-time high!

I’ve been very fortunate to ride this SF real estate bonanza since 2003. But after a recent bad tenant experience, I’ve been more open than ever to selling.

What I realized after Googling “should I sell my rental property” is that I’ve been thinking about doing just that since 2013 when one of my own posts showed up on the front page: Should I Sell My Rental Property And Simplify Life? At the time, I was going through another annoying situation with a condo neighbor. It’s always a trip when your own stuff pops up in search that you forgot you wrote.

As fate would have it, just two weeks after my tenants vacated, I received an offer that might be too good to pass up. Given it’s a good idea never to make big decisions when emotions are high, I thought I’d lay the situation out to gain some objective feedback. Let me first provide some background.