Is it time to rent?

[msbearkeley]

Hi all - found a great luxury apartment to rent during our last 2 years of working FT before our target date....just need to finalize fixing up our house to put it on the market...except now we are questioning our math and need your help please!!!

About us:

• High income earners, both in our early 40s, no kids; want to retire in 2 years
• Currently in a house in the city 4 nites a week (to work) and 3 nites in the country (to live)
• City home is 80k mortgage + 153k HELOC used to buy rental properties and expect to sell for 475k. Gain will be tax free - home sales exclusion as the primary residence. Plan is to sell this and rent a nice apartment for 2k a month - change of lifestyle; a way to enjoy the next two years stress free
• Country home has a 415k mortgage (mostly from paying off 2 SFH rental properties); currently worth 700 - 800k; might sell in 3 - 5 years; would also be tax free at that time if we sell city home now; may move internationally so nice to have options
• Plan was to take proceeds from city home and pay off 1st mortgage and HELOC and pay-off 220k outstanding mortgage on another rental property with a current rate of 6.375 on a 30 year; 220k is the balance, 1800 is the PTI
• Overall, our portfolio is at 60% RE (rental properties) so no interest in buying more RE with proceeds

The math:

• From a cash flow perspective, we will be reducing our mortgage (PTI) by approx 4650/month; renting an apartment for 2k a month -- sounds great!
• However, with tax implications, we would save 18k/yr in Interest and Taxes (31k pre-tax); and pay 2k a month in rent....that is an additional expense of 6k/yr - not so great!

What am I missing? True, we don't have to rent a 2k apartment but it's really cool -- great view of the washington monument and it has free starbucks in the morning! ;-) Also, paying off a 6.37% mortgage is 6.375 guaranteed return on investments but it doesn't seem right.

So the real question - aside from the math is: Having the long-run financial freedom of having our rental properties paid for and producing income and the flexibility to sell the country house in 3 years tax free, worth the short term increase in housing expense after tax. HELP!